Multinational pooling allows multinational companies to benefit from favourable insured claims experience on a world-wide basis.
Around the world there exist various methods of financing employee benefits. Many multinational companies choose insurance as a method of financing employee benefit plans. A multinational pooling account is essentially a second stage accounting of insured employee benefit plans at the international level. Such a process introduces the application of administration and risk charge retentions which are based on an accurate assessment of costs incurred in insuring a given group of employee benefit risks internationally. This approach means that ingoing premium levels, even if set by tariff, do not necessarily represent the cost of a given plan. In many cases the real or net cost will be much less, depending on the level of insured claims experience.
A multinational pool brings together insured benefit plans (retirement, death, disability, medical, accident) which have been set up locally for two or more countries. Premiums are paid by subsidiaries on a purely local basis, and claims settled by local insurers on a purely local basis. At the end of each experience year the local insurers involved in a given multinational pooling account will submit the results of the local plans to showing amounts held, received and paid in respect of those plans.
A multinational account is then drawn up showing premiums paid minus claims, minus the insurer’s risk retention and administration charge. This account also takes into consideration other items such as reserves, interest, non-rated premiums, local taxes, local dividends and commissions.
If the experience of the insured group is favourable, then there will be a surplus in the multinational account, payable to the client as a multinational dividend. Estimates by advisors on multinational pooling suggest that over a period of years an 8% to 15% reduction of local premium costs can be achieved. In years of good experience, dividend percentages can be substantial, even reaching 80% to 90% of risk premiums paid. (bron Insurope)
Please contact Doorneweerd Assurantiën BV for further information.