Multinational pooling is a concept which links insured employee benefit plans worldwide for multinational corporations and their global subsidiaries, and can be used in two key ways.
The first is to control the costs of an organisation’s employee benefits insurance; the second way in which it can be used is to merge or co-ordinate multiple employee benefits plans within their organisations.
It was originally developed to combat ‘tariff pricing’ adopted by European insurers but over the past 50 years has grown into a worldwide, multi-billion pound accountancy and risk management business.
A multinational pooling network consists of a number of insurance companies located in different countries around the world and can either be independent or owned by an insurer.
Independent networks generally have a wider geographical coverage and have the ability to select the leading insurers in each country as local partners, offering greater flexibility.
Normally, multinationals with more than 1,000 eligible employees and five or more overseas subsidiaries are those considered most suitable for multinational pooling.
However, the multinational pooling providers’ definition of a suitable company is generally “a company operating in two or more countries.”
The spread of a multinational pool can be limited by the absence of a suitable multinational pooling network partner in a particular country, although insurers can work with international partners to provide multi-nationals with wider coverage.
In the UK group life assurance, death in service pensions, group income protection, group critical illness and group private medical insurance can be pooled. In other countries, pension plans and other employee benefits such as dental insurance may also be pooled.
How does pooling work?
Multinational pooling offers clients the potential to create what amounts to a global profit share arrangement. It leverages economies of scale and can reduce the cost of their employee benefit provision through the payment of multinational dividends.
The facility also offers the client’s headquarters access to information in respect of the benefits provided by its individual pooled policies, something that is growing in importance for many companies.
Multinational pooling networks usually have a network partner (for example, an insurer who forms part of the network) who specialises in insuring third country nationals and expatriates, which simplifies the process of obtaining such insurances.
In order to qualify for multinational pooling, an organisation must have insured employee benefits in two or more countries.
The organisation then places their insurance policies with the multinational pooling network partner in each country, and the policies are combined to form a multinational pool.
It is important to note that in each country the policies remain insured with local insurers, which allows for one of the key benefits of multinational pooling; companies benefit from local terms and conditions, administration and claims settlement.
Questions appear on the last page of this article.