Pooling is a financial product that allows multinational companies to purchase employee benefits insurance policies, also known as group insurance policies, on a worldwide basis, and benefit from a probable reduction in insurance premiums as well as from exhanced reporting and transparency.
No. In short, pooling is only about group life insurance for multinationals.Insurance contracts are segmented according to what is covered (the nature of insured risks: goods, liabilities or people), on the one hand, and to the nature of the insured entity: individual, business, government, association, on the other hand. Pooling deals with life insurance, where the risks are that a human being becomes ill, disabled, dies, does not die, etc... Within life insurance, pooling applies only to contracts signed by corporations on behalf of their employees as part of their remuneration policy (“compensation and benefits”). Group insurance policies often supplement insurance provided by local social security systems. A group insurance policy involves three parties: the corporation, which pays the premiums, employees who receive benefits from the insurer, and the insurer who receives premiums from the company and pays benefits to employees. In the area of group insurance, pooling applies exclusively to businesses, governments, associations that are "international", "multinational" or "transnational", i.e., those that have employees in at least two countries. Again: pooling is about group life insurance for multinationals.
These are synonyms. Pooling is also called global pooling or multinational pooling.
Pooling usually results in a reduction in the cost of group insurance; and always includes a detailed reporting of group insurance policies worldwide, which enhances transparency and governance.
Buying group insurance “in bulk” allows the organization to benefit from profit sharing (also known as “participation”) determined on a global basis. The purpose of a pool is to implement such a global profit sharing system. Global profit sharing is much more efficient than local profit sharing arrangements due to better mutualization (or diversification) of risks when considered globally, not multi-locally.
Pooling is provided by international networks of insurers, present through network insurers in 60 to over 100 countries. Each network is managed by a central staff coordinating the work of local insurers and providing an interface between client organizations and network members. The client organization enters into a single contract with the network that is binding on all its members. There are currently eight networks, belonging to the world’s largest global insurers: Allianz, AXA, MetLife, Generali, ING, Prudential, Manulife, Swiss Life and Zurich.
Based on reports provided by the pooling network, EasyPooling first checks the conformity of profit sharing calculations with the pooling contract. Then EasyPooling analyses outcomes and makes recommendations both overall and for each local contract. These recommendations aim at optimizing both local and global employee benefits and the profit sharing system itself.
After all, this is common practice in property and casualty insurance... Ideally, we would replace all local contracts and the pooling arrangement with a single group insurance policy having global reach. Unfortunately, this interesting concept is not feasible in practice for tax and regulatory reasons. Taxation and regulation of insurance are very different from one country to another, mainly because they are complementary to extremely diverse social security systems. This is why the single global group insurance policy cannot exist. However, there are pan-European single life and health insurance policies, covering all employees located in the European Union while respecting the rules and regulations of all countries. Launched in the late 2000’s, these products are not yet very widespread despite their obvious advantages: replacing 27 local contracts with a single centralized policy is a great improvement! EasyPooling will be happy to discuss the advantages of pan-European plans, which can perfectly fit into the framework of a global pool.
All employee benefit policies tailored for international mobile staff can be pooled. This regards mostly expatriates’ coverage but also policies covering short-term assignees, TCNs and traveling professionals. In addition, most pooling arrangements include provisions to facilitate the international mobility of employees within the same corporate group: waiver of medical examination or waiting periods upon mobility, increased and identical coverage limits (so-called “free-cover limits”), access to expatriate policies tailored to expatriates coming from different countries: North America, Anglo-Saxon world, Continental Europe, Asia, etc.
All employee benefit insurance policies remain local. At the inception of a new pool, they may move to new local insurers – those belonging to the chosen pooling network - but new terms and conditions are negotiated and are either identical or similar. An additional agreement is signed between the parent company and the pooling network. This agreement determines the profit-sharing formula and the international reporting that you will get. It may also include other significant items, for example improvements on medical underwriting, on portability guarantees, on deductibles and free-cover limits, etc.
Many networks offer significant advantages beyond lower costs and reporting. These advantages usually come free and may include items such as: waiver of waiting period when an employee moves from one country to another, waiver of medical underwriting even in countries where there are few employees, higher free cover limits, especially regarding sums to be paid in case of death or disability, etc.
All developed countries allow pooling of group insurance policies. However, some countries still prohibit or curb cross-border reinsurance of life/health insurance, which is the technical tool on which international pooling is based. Among these countries, India and Brazil. However, the situation is evolving favorably and global employee benefits reporting services are available in all cases.
Smaller, poorly negotiated group insurance policies or contracts from countries where profit sharing is not available cannot benefit from profit sharing at the local level. A key advantage of pooling is that it includes profit sharing on a global basis and on identical and the most favorable terms. Even the smallest local policies are part of a very large contract and they are treated accordingly.
At constant local conditions under no circumstance will the cost be higher, because the rebate (profit sharing) is always favorable to the client. In other words, there is no participation of the client in possible losses, they are the responsibility of the network. In addition, the reporting associated with pooling is used to determine preventative measures leading to lower clains and therefore a reduction in insurance costs without the need to negotiate, any reduction in claims resulting automatically in an immediate increase in profits returned, of the same amount.
All products offered by the eight pooling networks are comparable, but the formula for profit sharing varies from one product to another and may be more or less well fitted to your needs. Particularly, there is a tradeoff between the level of the "network fee" and the treatment of losses. Losses may be fully borne by the insurer in the year they are incurred (higher network fees) or they may be carried forward to be absorbed by future profits (smaller fee).
No, not exactly. The first network, Swiss Life, was established over 50 years ago. Pooling is not a new idea. However, so far, pooling was only for large multinational corporations. What changes now is the ability for smaller organizations to benefit from pooling with operational support provided by EasyPooling.
The reports include, for each local insurance policy, information on premiums paid by the client, claims paid by the insurer, administration costs of the insurer and of intermediaries (brokers and tied agents), financial income, and other elements of an income statement. Profit sharing is determined based on this income statement. Most networks provide further information, such as the number of employees, the number of insured persons (employees and their families), the number of claims ... Most networks provide a yearly report 5 to 6 months after the end of the year. This delay is necessary to collect information from relevant insurers worldwide.
Yes and no. The savings component of a retirement plan does not include insurance risk, and hence cannot give rise to profit sharing. However, if the retirement plan includes health or death/disability benefits (for example, a survivor's pension), such elements are subject to risk and can be pooled. In this case, the savings component also is provided by the insurer of the selected pooling network. For a full picture, in fact savings can also be “pooled". However, it is a different type of pooling altogether. It is a pooling of assets or of information that does not fit within the definition of multinational pooling as offered by EasyPooling. To date, very few multinationals have implemented “pensions pooling” but it is growing in acceptance and EasyPooling will gladly refer you to international pensions networks.
Captives are fashionable among risk managers, who use it as a tool in their risk management operations with respect to their operational, liability and financial risks. Establishing a captive supposes to have a strong appetite for risk, to tie up significant amounts of capital, to establish professionally managed reinsurance operations including a team of specialists: risk managers, and to get a return on high fixed costs. Captive operations tend to be located in places where you may or may not be present at this time, such as Zug (near Zurich, Switzerland), some funny islands off the coast of the USA, etc., places carrying the stigma of tax havens and worse. Such constraints put captive reinsurance out of the reach of most organizations. A pool reaches most of the objectives of a captive without risk: there is financial gain, one is guaranteed to work only with reputable local insurers, pooling includes a systematic collection of information of consistent quality, all without additional internal costs or tied-up capital. Finally, the implementation of new European regulations on insurers' equity (Solvency II) leads many owners of captives to challenge even their existing structures.
Pooling leads to identical or higher profits for your organization. Therefore, your tax burden will increase. Not an issue for your favorite taxman. Assuming constant local insurance terms, pooling has no impact on the taxable income of local subsidiaries. Even if local premiums change upwards or downwards, this would not have an impact in the country concerned: an increase in premiums paid by the local subsidiary to a local insurer would lead to a decrease in the taxable base of the subsidiary - exactly offset by the increase in the taxable base of his insurer, and vice versa.
No, the international profit sharing of a pooling arrangement either replaces or is added to local profit sharing. Of course, local profit sharing reduces by as much the amount available under international profit sharing.
It is a legal entity such as a corporation (LLP, PLC, AG, GmbH, etc.), an agency, branch or other permanent establishment, controlled directly or indirectly by the parent company. If the subsidiary is consolidated, then it falls within the scope of pooling. If it is not consolidated, it may possibly enter the perimeter of pooling but we need to assess your situation more closely.
On the one hand, so far pooling is primarily for large organizations. On the other hand, many small or medium sized intermediaries do not have sufficient in-house expertise to support you abroad and they believe there is a risk of losing you as a customer. This fear is unfounded. In fact, the local intermediary - broker, tied insurance agent – is always needed for e.g. handling disputes regarding a claim, and/or for policy administration such as enrolment, claims, etc.
Yes, very much so. Cash-pooling is a technique for calculating interest on bank deposits by taking into account all deposits and overdrafts throughout the world. "Fund pooling" or "pooled funds" mean collective investments. It is a synonym of UCITS and "mutual funds". There are also maritime, air and land transportation pools, news pools, vehicle pools, oil pools, etc. Generally, the word "pool" means, "A grouping of resources for the common advantage of the participants." A great definition for global employee benefits pooling as offered by EasyPooling!
With all its advantages, pooling is not that widespread. There are several reasons for this. Insurance intermediaries are not doing a very active promotion. The press mentions pooling only rarely. Pooling is seldom taught in training courses for human resources specialists, with the exception of global compensation & benefits managers. That is why the market remains in the hands of a few specialist brokers, consultants, insurers and compensation and benefits managers of multinational organizations. EasyPooling’s “raison d'être” is to actively promote this tool, to assist you in the implementation phase by ensuring greater transparency at every stage and to allow you to enjoy the benefits of pooling without risk and with little effort.
Group life insurance insures groups of people (e.g. employees of an organization and their families), whereas individual life insures only a person and his/her family. With group insurance, the employer (HR, CEO) is responsible for the insurance policy and process, whereas employees and their families benefit from the insurance coverage. Premiums are usually shared between the company and employees. Group insurance may also be purchased by a local authority, a government, a non-profit... On the other hand, a person buying individual coverage will pay the full premium corresponding to the coverage of himself/herself and of his/her family.
A pension is paid to a beneficiary, usually a retired employee. In some cases, if the beneficiary dies during the payment period, the pension continues to be paid to another beneficiary, usually a spouse. Often, the survivor’s pension is lower than the initial pension.
One purchases insurance coverage against an insurance risk. If the risk materializes, the guarantees included in the contract are activated. E.g. risk of death: if death occurs, the payment of a lump sum or of an annuity will be made to a certain beneficiary. Other examples of risk in life/health insurance: sickness, accident, but also living on (!), as living on triggers pensions payments after a certain age or passage of time. Even birth (what a risk!) can give rise to the payment of a lump sum out of a healthcare policy.
Insurance coverage is activated and gives rise to a payment by the insurer upon realization of a risk. Examples of coverage in life/health insurance: lump sum payment in case of death, disability annuity, sickness benefit / daily allowance in the event of inability to work following illness or accident, retirement annuity...
Premiums are the amount of money paid by the employer to the insurer under his insurance contracts. Group insurance premiums are generally paid quarterly in arrears and are proportional to wages. Premiums may be expressed “before taxes” or “with taxes and duties”, i.e., insurance taxes and duties. Usually, premiums “before taxes” are used in pooling reports.
Group insurance is a generic term encompassing health insurance (medical, dental, optical, hospital, etc.), life insurance (death, incapacity, disability, accidents, etc.), workers compensation, retirement, etc. when purchased by an employer for the benefit of employees.
The price of insurance is determined using an assumption regarding the cost of claims. If the cost of claims is less than expected (“the experience is better than expected”), a portion of the premium paid at the normal rate is refunded to the client. Terms and conditions of profit sharing are negotiated between the insurance carrier and his client. “Profit sharing” is also called “participation” or “experience rating”.