What is Multinational Pooling

Multinational pooling is a method global companies use to manage the risk of their employee benefit plans throughout the world. The different employee benefit programs of a multinational company are combined to form an international pool. The result of multinational pooling is financial savings and better control of risks.

Breaking Down Multinational Pooling

As a concept, multinational pooling involves the combination of policies from more than one country into a multinational pooling program. The financial mechanism of such a program involves the use of dividend payments on a multinational level. Such a practice can be employed to bring down the costs of insured employee benefits. Multinational pooling can be a money-making solution for smaller insured pools (such as ones under 100 insured individuals), which are not large enough to be experience rated (meaning there is not enough historical data to effectively calculate the risk of future claims and therefore perform a meaningful measure of how much a policy should cost). Multinational pooling allows even the smallest of insured groups to join a pool, to efficiently price risk and benefit from whatever savings may occur.

Multinational Pooling vs Local Level

Another way of describing multinational pooling is "the multi-country aggregation of the financial results of local group insurance contracts into one experience rated pool," according to one benefits consultant. In short, the insurance provided by multinational pooling works exactly the same on the local level, but taken on a multi-country scale. Local-level administration and policy terms are unchanged under a multinational pool. Premiums and claims are paid just as if no pool was employed. There is no additional administration cost for local pools. Essentially, multinational pooling provides the benefits of a single product that offers the risk management, scale and pricing advantages of a much larger pool.

Multinational pooling may be employed with several types of insurance, such as medical, disability, accident, death and fully-insured retirement savings plans (such as an annuity-based defined benefit plan).  

Multinational Pooling Types

There are two types of multinational pooling: company-specific and multi-client. Company-specific pooling is used by multinationals with international clients who are large enough to do the pooling on their own. Multi-client pools are available for companies who are less global but can none the less save costs by joining forces with other companies.

There are several benefits to using multinational pooling for companies both large and small. They include:

  • Economies of scale and purchasing power
  • Global experience rating
  • Financial cost savings
  • Improved underwriting terms and conditions
  • Annual reporting
  • Management tool and information base