Key Aspects of Multinational Pooling and how they can produce savings for multinational companies

1

• Key Aspects of Multinational Pooling and how they
  can produce savings for multinational companies
• Malcolm Penny and Pete Regan
• Insurope UK and Ireland

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In the beginning.

• Network Search
• Convenience Pools
• Network capabilities
• Initial composition
• Starting afresh

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Factors to consider

• Centralised or De-centralised structure
• Subsidiary as well as HQ interests
• Your attitude to risk
• Dividend distribution
• Balancing considerations
• The Pool basis or system

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The basic principle (1)
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The basic principle (2)
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Insurope Pooling systems

• Stop Loss
• Loss Carry Forward
• Flexible loss limitation features
• Aggregate Stop Loss, adjustable
• Optional Time limitation, 2, 3 or 5 years
• Multipool
• All systems incorporate market leading individual
  stop loss (Network Rating/pooling Limits) and
  Network Free Cover levels

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Attitude to Risk
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Pool Protection

• Rating Limits the maximum amount of benefit
  included in the pool per individual
• Based on number of lives in the pool
• Same level adopted for Network Free Cover
• Insuropes rating limits are the highest in the
  market
• Increased levels can be discussed as pool grows

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Risk Charges

• Pool dependent
• Number of lives in the pool
• Margins in the premium rates
• Weight of countries/benefits/lives/non pooled
  premiums
• i.e. the composition of the pool
• The pool basis

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Administration charge

• Represents the cost for the local administration
  of the insured plans included in the pooling
  system
• Charges are governed by an Insurope worldwide
  network scalenot simply a question of local
  charges apply
• Shown separately from Risk Charges to ensure
  transparency

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Implementation Considerations

• More actively managed pools produce better
  returns
• What will be the approach to participation?
• What is policy for dividend distribution?
• How much local benefit information is currently
  available?

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Implementation ProcessStage 1

• Form management group
• Collect information
• Prioritise
• Renewal date
• Size
• Cancellation Periods
• Communication, including basis of approach
• Get quotes equal or beat

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Implementation ProcessStage 2

• Review/Reflect Stage 1
• Feedback
• Prioritise remaining non pooled countries
• Revise/reissue communication
• Continue review meetings
• More quotes
• Analyse first results

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Local considerations

• Margins for pooling
• Past claims experience
• Current contract terms and conditions
• The consultants role
• Impact on the pool as a whole
• New system required?
• Stop Loss Admin charges
• Spread of risk

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The UK perspective

• Providers Canada Life and BUPA (medical only)
• Highly respected experienced
• Canada Life have a significant part of their
  portfolio pooled
• A pro-active and not reactive stance on pooling
• Many consultants no.1 choice is Insurope Canada
  Life
• Will pool Employer paid Life, Spouses DIS
  pensions, Income Protection and Critical Illness

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The UK perspective

• Group Life
• Straightforward and simple
• Still sufficient margins in the UK
• Spouses DIS Pensions
• Expensive benefit less DB plans move to
  additional multiples of salary
• Capitalised value of Pension credited to pool as
  claim

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The UK perspective

• Group Income Protection
• Not all providers will pool this benefit
• Reserves credited to pool
• Claims can have a major impact on standalone
  pools
• Its all about experience (which we have!)
• Private Medical Insurance
• Simplistic pricing structure, limited margins
• Volatility of claims

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..and in the end

• To be successful in pooling and to ensure both
  HQs and Subsidiaries benefit you need 3 key
  elements
• Partnership
• Pro-activity
• Communication

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Why Insurope

• Strength
• Stability
• Experience
• Coverage
• Flexibility
• Transparency
• Market leading Rating Limits and Free Cover
• UK based pool management