Multinational Pooling
Nordben is a Member of two of the world’s leading networks, IGP and Insurope.
Nordben’s products can be included in an IGP or Insurope account. For further details about IGP or Insurope please visit their web sites:
What is Multinational Pooling?
The concept of Multinational Pooling has been around for over 50 years. It is the linking together of group insurance contracts (with a “network” of insurers), effected in two or more countries by subsidiaries of a multinational corporation, for the purpose of combining claims experience under these contracts. The Pooling operates on two levels.
- Local contracts between the subsidiaries and the local network Insurer
- Global contract between the parent company and a Multinational Pooling Network.
So, for example,
The overlaying global contract does not effect the local contracts. The local contracts will meet all local legal and tax requirements. Most insured group and employer paid employee benefits can be pooled:
Death
Disability
Retirement (but no defined contribution)
Medical
Accident
In a simplified example a “Pooling Account” could look something like this:
| |
A |
B |
C |
Total |
| Premiums |
60 |
100 |
20 |
180 |
| Investment income |
8 |
10 |
3 |
21 |
| Total income |
68 |
110 |
23 |
201 |
| |
|
|
|
|
| Claims |
30 |
60 |
30 |
120 |
| Insurers' margins |
10 |
16 |
4 |
30 |
| Total outgo |
40 |
76 |
34 |
150 |
|
|
|
|
|
Experience rating balance
or multinational dividend |
28 |
34 |
(11) |
51 |
Research has shown that a well balance Pool can expect to yield on average 5% to 10% of total worldwide insurance premiums in the form of an annual dividend.
So, where do savings come from?
| Tariff countries |
Those countries where governments regulate conservative pricing structures that all local insurers have to follow - this is very rate but was a significant source in the early years of Multinational Pooling. |
| Favourable claims experience |
The multinational benefits from including insurance contracts that yield a good claims experience. |
| Reduced insurer margin |
The insurer accepts lower margins in return for enhance contract presistency. |
| Global purchasing power |
The parent company is able to pressure the network into delivering "best premiums". |
What other benefits can "Multinational Pooling" bring?
| Improved underwriting conditions |
The networks typically offer guaranteed issue or free cover greater than local norms, i.e. the need for medical examinations are reduced. |
| Global service Standard |
The networks aim to deliver global standards in terms of claim settelment, renewal, contract issue etc. |
| Global governance |
The networks report to the parent company on the multinational's global benefit plans. The parent company has increased oversight/control. |
| Information |
The networks supply benefit information so that the multinational knowns what is best practice, new market developments etc. |
22 August 2008
Paul Cutter
August 2008