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Multinational pooling is an important financial vehicle used by employee benefits managers and risk managers worldwide to reduce the escalating costs of insurance and to coordinate employee benefits plans within their organizations. The International Group Program (IGP) is the leader in multinational pooling with over 830 clients.
IGP offers a broad range of products to ensure that each multinational corporation's pooling package accommodates its specific needs and achieves maximum savings.
The savings a corporation has earned through pooling are determined on an annual basis by netting out claims, changes in reserves, commissions, taxes and other expenses from the worldwide premiums paid plus interest credits. The remainder, if positive, is paid to the multinational corporation in the form of an international dividend. Many of IGP's clients have had a significant portion of premium returned to them as international dividends at year-end through the pooling of their international employee benefits plans.
The IGP accounting system preserves all of the benefits of dealing with a prominent national insurance company whose expertise focuses on the local market. In addition, IGP provides advantages at the international level.
Multinational pooling works as follows:
A First Stage Accounting reflects the experience of a participating insurance policy in a given country.
By Second Stage Accounting and "pooling" policies that a company provides in several countries, savings are generated through economies of scale and efficiencies in administration and reporting.
First Stage Accounting reflects what occurs under a group employee benefits policy in the absence of a pooling network. First Stage Accounting is the calculation of the net cost of insurance to the subsidiary, which is the premium less the local dividend (profit sharing), if applicable.
All coverage is provided through local policies issued by Network Partners to participating subsidiaries. From the employees' point of view, these are standard policies issued by prominent, locally admitted, national insurance companies. Each policy's plan design reflects local market practice.
From local management's point of view, the arrangement is as good as, and often better than, what can be obtained locally, even before considering the additional advantages of pooling.
IGP combines the experience of each participating local insurance policy (First Stage Accounting) to create the client's International Account. An annual Second Stage Accounting is then prepared for each of these policies, which generates additional savings by taking into account the expenses, risk, and claims of the company's entire pooled employee group worldwide.
In this accounting:
The annual Second Stage Accounting determines, for each policy, a Contribution to the International Account (CIA), as follows:
Premium Paid
Plus:
Less:
Equals: Contribution to the International Account
The Contribution to the International Account (CIA) is positive if the experience has been average or better than average in a given year, or negative if the experience has been poor.
How Second Stage Accounting Works