Multinational Pooling and Captives
Bringing your employee
benefi ts together
The benefits of working with ZEBN
• Over 30 years’ Multinational Pooling experience.
• Access to the ZEBN global network – market-leading local
insurance companies as partners in over 60 countries.
• Tailored pooling systems to suit a company’s
individual requirements including captive solutions.
• Transparent, detailed management information.
• Confidence of working with a financially secure partner.
To meet the needs of both areas, Multinational Pooling is an option that many multinationals take advantage of to group multi-country, local benefit insurance contracts into one experience-rated pool. At the local level, benefits are provided and the insurance contracts are unaffected; yet on a multi-country scale, it works as if the employer has one experience-rated insurance product.
A global network
The Zurich Employee Benefits Network (ZEBN) is a global network of market-leading insurance companies offering products and services in over 60 countries. ZEBN consists of both Zurich-owned companies and top-quality local insurers in countries where Zurich does not have a local presence. Irrespective of ownership all partners share a common purpose to offer competitively priced high quality products and services to our corporate clients. Zurich has over 30 years of pooling experience, and through our global network of partners we offer a range of international programs such as reinsured pooling and captive solutions, benefits for expatriates and mobile employees and fully compliant local plans. All of our international solutions can be tailored to meet the needs of multinational companies looking for a global carrier. Our aim is to continually expand the options and resources available to our clients, and we achieve this through strengthening our existing partnership
arrangements and adding new partners in the countries that our clients are moving into.
Our partnership approach extends from ZEBN right the way through our Network, earning the trust of our clients locally and internationally by delivering excellent services with a fully transparent cost structure.
The Human Resources (HR) and Financing functions of multinational companies are
tasked with the challenge of providing the right employee benefits – at the right cost.
HR needs to ensure the benefits are cost effective, meet expectations and help
motivate and retain employees, while finance is usually concerned with the cost of
providing these benefits.
Reinsurance
As well as a global network of partners, ZEBN has the significant advantage of reinsuring the benefit contracts. This means we share in our clients results – and this shared risk translates into a selection process that can produce favorable results that focus on creating cost efficiencies for our clients.
The following group insurance benefits can be included in a pooling agreement:
• Group life and survivors benefits. • Disability.
• Accidental death and dismemberment. • Health.
• Combined contracts (risk and retirement savings in the same contract).
Reduce the cost of your
employee benefit plans through
Multinational Pooling
Cost management – Multinational Pooling helps keep
plan costs under control on a worldwide basis.
Cost savings can help fund other employee benefits. International dividend – A positive claims experience
results in the payment of an international dividend to the parent company.
Helps align benefits at a group level.
Flexible underwriting – ZEBN, through its network
partners is able to waive underwriting requirements such as medical evidence up to a certain limit. This feature, known as free cover, often increases the limit available to local markets. If the free cover limit in local markets is more generous, those limits will apply.
Centralized reporting capability – Transparent, detailed
benefit plan information per country, down to individual contract level.
How Multinational Pooling works
1 Benefit plans are negotiated locally on a country by
country basis and insured through local insurers who are part of the ZEBN network.
2 Premiums are collected, claims are paid and other
services provided – all at a local level.
3 After the contracts have been placed with the local
insurer, the multinational company may then decide to pool the local contract. Life, disability, health, accident and insured retirement plans can all be pooled with ZEBN.
4 Contracts are then brought together in a pool. By
pooling the contracts with ZEBN, the contracts can be treated as a single item for experience rating purposes. Shown below is an example of how the pooling concept works based on a multinational company with subsidiaries in three countries.
The benefits of Multinational Pooling
The pooling result
The surplus from country A and country C minus the loss from country B is 440,000.
ZEBN’s international expenses and the reinsurance fee for client’s pool are taken from this
The pooling result
This table shows the impact of combining benefit plans to take advantage of experience rating. The combined surplus from countries A and C is paid to the parent company after the losses from country B and the international expenses associated with a client’s pool have been deducted. Without pooling, the positive results from companies A and C would have been lost by the client.
Total Country A Country B Country C Premiums 1 200 000 400 000 200 000 600 000
Benefits paid -480 000 -100 000 -180 000 -200 000 Local adm. charges -160 000 -50 000 -30 000 -80 000
Commissions -40 000 0 -10 000 -30 000 Local dividends -80 000 -30 000 0 -50 000 Local balance 440 000 220 000 -20 000 240 000 Risk charge -62 000 -20 000 -12 000 -30 000 Coordination fee -18 000 -5 000 -3 000 -10 000 Int. dividend 360 000 195 000 -35 000 200 000
Stop loss
This option protects results immediately as any losses are absorbed by the local partner at the end of each reporting period.
Loss carried forward
Losses are carried forward to the following year and are then offset by any surplus made in future years. The loss can be carried forward for one to five years as requested by the client.
Any losses which cannot be compensated within the agreed period are written off by ZEBN at the end of the agreed year following the accounting period in which the claims occurred. The loss carry forward solutions contain a risk charge to cover the write-offs after the agreed period.
Extended stop loss
Again, losses are carried forward to the following year and are then offset by any surplus made in future years. The loss can be carried forward for two to five years as requested by the client. Any accumulated losses which cannot be compensated within the agreed period are written off by ZEBN at the end of the agreed period.
Flex-pool
Flex-pool opens the door to the benefits of pooling for a small or mid-sized multinational company by consolidating its local contracts with other ZEBN clients for the purposes of experience rating.
The Flex-pool solution is suitable for multinational companies insuring one international operation in one country. This enables multinational companies, which currently do not fulfil the ZEBN pooling requirements for a stand alone pool to immediately participate in combined experience rating. The company is exposed to a better spread of risk and potentially improved results. Flex-pool is available with the stop loss option only. This means any losses are waived completely on a yearly basis. The inclusion of contracts into the Flex-pool will
Pools don’t always generate a surplus for the parent company, and if the total
claims experience of a client’s pool generates a loss, where claims and expenses
exceed premium and investment income, there needs to be a system in place to
manage this loss. We offer clients a selection of ways to recover or pay off a loss.
Consolidated management information
One of the key benefits resulting from pooling is consolidated management information. At the end of each reporting period, we provide a profit and loss report that details an overview of all employee benefits contracts held within the pool, at both a global and local level. Benefit spending is split by country so costs are clearly shown and can be compared country by country. This is an invaluable tool for managing employee benefits worldwide and provides:
• results for the reporting period • year-on-year results
• an international dividend if the overall result is positive • an overview of contracts per country
• detailed contract information, including the number of insured persons, risk premium and benefits paid.
Finding a pooling system that
works for you
ZEBN Advantage
ZEBN has access to a wealth of experience in
implementing successful captive insurance programs. This experience has been gained through the management and design of non-life Captive Programs as well as through involvement with employee benefits captives since its very beginning. We leverage this experience to successfully implement and administer captive linked worldwide benefits programs. This experience, combined with ZEBN’s access to a high quality network of local benefits insurers, places us in a unique position to serve our clients.
ZEBN has the capability to provide our clients with the tools necessary to create a captive program tailored to a multinational company’s individual risk management philosophy. The following approaches are available:
Transfer of the multinational pooling dividend to the captive
Our client’s captive becomes the contract holder of the multinational pool. Year end pool dividends that are transferred to the captive allow for the accumulation of funds with no assumption of risk.
Transfer of risk to the captive
The multinational captive assumes the risk previously carried through ZEBN. The captive may wish to consider specific stop loss to cover peak risks. With this option, there is no transfer of premium and the program operates on an end-of-year adjustment basis where pool surpluses are paid to and pool deficits are recovered from the captive.
Depending on size and risk appetite of the parent company, a Captive Program
offers the possibility to increase self-insurance beyond classic multinational pooling.
Transfer of premium to the captive
• Concept
Local benefits contracts are issued through local ZEBN partners based on market practice in each country. A small portion of the premium is retained at the local level for expenses. The premium is then forwarded to ZEBN reinsurance office for consolidation and onward transmission to the captive. The captive assumes responsibility for the funding of claims. Reimbursements of death and disability claims are on a paid or at least on a quarterly basis through the issuance of a bordereau from ZEBN. Should our client decide to limit the captive’s risk, ZEBN offers several forms of reinsurance.
• Requirements
Although there is no minimum premium requirement, we believe that in most cases, transferable annual risk premium of at least USD1.5 million (USD50,000 per country) is necessary to achieve meaningful cash flow advantages and overall savings, and will justify the time and expense of implementation and ongoing administration of the captive arrangement.
• Advantages
– Enhanced cash flow to the client.
– Improved yields by self-management of premium, reserves and excess margins.
– Captive portfolio diversification. – Increased flexibility in plan design.
– Enhanced underwriting flexibility (guaranteed issue limits, etc.).
– Continued local compliance and admission of local contracts. – Elimination of insurer’s risk charges. – Greater corporate control over plan utilization.
Captive Programs as the natural
evolution of pooling
If you are a multinational company and are considering starting or modifying your
international employee benefits program, the Zurich Employee Benefits Network
(ZEBN) has the global vision and local insight to help you create a program that will
truly be a benefit to your employees and your company as a whole.
Building tailor-made programs for you
We look forward to having the opportunity to personally discuss our programs or to send you further information.
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