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Articles from The Business Forum Journal

by Richard Polak


Until recently, Multinational pooling was only available for groups over 100 employees.  Now, emerging multinationals can benefit with as low as 10 employees in two countries.

What is Multinational Pooling?

Multinational Pooling is a system of bringing together the insurance coverages of selected worldwide benefits into one or more POOLS to achieve experience rating and administrative savings.  We highlight the word “selected” because we generally wouldn’t include funded pensions and certain medical plans.


Multinational Pooling started as a means to extract the margin on over-priced insurance rates.  The excess is returned to the policyholder at the end of each year.  Because of Tariff rates (rates prescribed by law), multinational pooling became the only means to “skim the cream off the top” that the insurance companies would normally pocket as profits.  Below are other advantages: 

Financial Example of the Potential Savings

What follows is an exhibit outlining the potential savings of multinational pooling. The results can be staggering.  We recently assisted a company with their multinational pool, which yielded them savings of over $800,000.


Country 1

Country 2

Country 3



























Local Dividend





Int’l. Dividend





Assumptions for the above numbers:

1. Country 1 does not permit dividend due to small size of the group.

2. Country 2 is a tariff-rated country.

3. Country 3 holds the margin .

Multinational Pooling; Phase I - Setting Objectives

The first step is to set objectives.  Your company must prioritize the following items in order of importance:

        Cost reductions

        Improved underwriting terms

        Increased control over local insurers

        More complete information for management

        Detailed financial data each policy year

        Greater ease of transfer of benefits for employees (TCNs) from one country to another

Multinational Pooling; Phase II - Data Collection

Crucial to any study is accuracy of the collected data.  In this case it is relatively painless.  A simple form identifying the company’s insurance financial picture for each country is all that is needed.  The forms are collected and summarized.  They are then submitted to the insurance networks for a bid.

Multinational Pooling; Phase III - Analysis

The results of the bids should be reviewed quantitatively as well as qualitatively.  It’s important to consider service in addition to costs.  In addition, simply by conducting a pooling study many other opportunities arise.  They include:

a.      Reducing aggregate premium costs where feasible

b.      Increasing or providing full experience rating of coverages and claims in locations where normal experience rating is not permitted due to size or other factors

c.      Reducing insurance expenses in administering the plans

d.      Optimizing interest credits on both premiums and reserves

e.      Reducing risk charges due to an increase in premium volume

f.        Lowering actuarial margin requirements

g.      Evaluating the movement of TCNs who transfer from country to country

h.      Providing an improved surrender value on pension assets

i.        Liberalizing any restricted underwriting requirements

j.         Optimizing any financial arrangements that are not being considered or creating new approaches for cash flow purposes

k.      Determining the opportunity for greater leverage with one or more pools;

l.         Simplify administrative time and expense by choosing insurance companies for future locations

m.    Creating administrative guidelines to follow so the pool will prosper in the future  

The Players in the Market

1.      Single Insurance Companies with branches: Swiss Life, CIGNA.

2.      Insurers with foreign partners: Aetna Generali, AIG/Winterthur.

3.      Associations: Insurope, GAIN, IGP and MIA.

Multinational Pooling: Phase IV - Implementation

Once a Network or Networks are chosen, the transition to the new local insurers needs to occur.  You will need to ensure that the plans are taken over on a no-loss; no-gain basis.  Much of this is negotiated during the marketing phase.  However, inevitably there are local carriers that will not adhere to this policy.  Each country must be delicately transferred to the new carrier.  An International Consultant can oversee this transition.


       Follow a plan - Regardless of the country a plan should be established on how to tackle the benefit programs.

       Give yourself time - Don’t forget that international issues invariably take longer to accomplish.

       Get assistance early - The sooner you get the proper advice the easier your job will become.  Don’t get stuck with promises that can’t be kept.  Get advice early.

       Remain Flexible - While we’d like everyone, everywhere to do business at our pace and manner, it simply is not the case.

       Beware of local relationships - There generally isn’t a reason to be terribly concerned, but beware of what is being recommended when it comes from your local office along with their local consultant.

Be Creative - Take advantage of the flexibility and less restricted local laws.  It’s an opportunity to design some exciting packages for employees.

About the Author:

Richard Polak is President and CEO of Polak International Consultants, Inc.  During the past five years the company has grown to include consultants in Los Angeles, Santa Clara, San Diego, St. Louis and Miami with affiliates in over 60 countries.  In Mr. Polak’s 23 years of consulting experience he has advised over 200 multinational organizations in the areas of international management, human resources, compensation and benefits.  Some of those are: Avery Dennison; GTE; Netscape Communications; BMW; Hilton Hotels Corporation; Occidental Petroleum; Caterpillar; Intel; Pan Pacific Hotels and Resorts; Church of Latter Day Saints; Janus Mutual Funds; SAS International Hotels; Computer Sciences Corporation; Magnavox; Sun Microsystems; Corporate Express; Mattel Toys; Walt Disney Company; Discovery Channel; Microsoft; World Vision; Fluor Daniel; NEC America and Worldwide Church of God.

Mr. Polak has consulted management on their overseas operations and conducted studies in all areas of international human resources including design and implementation of overseas pension programs; benefits and compensation for expatriates and third country nationals; multinational pooling; consolidation through mergers and acquisitions; administration; communication programs and corporate policy development.

Prior to forming Polak International Consultants, Mr. Polak was the Western Regional Manager of Foster Higgins’ international practice (now William M. Mercer).  While there, he built the largest department outside of New York, which managed 73 international accounts.He holds a Bachelor of Science degree in Business Management and Mathematics from Alfred University in New York with continued studies at Columbia University, The New School for Social Research and UCLA.

Previous articles by Richard Polak:

Managing Your International Benefits - Part I
Managing Your International Benefits - Part II

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