Pool Expansion
This section features different topics ranging from free cover to dividend distribution philosophy which might be used to help constructively expand Insurope multinational pooling arrangements.| Multinational Dividends - Redistribution support available from Insurope |
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Maintaining (and increasing) an impressive pool volume depends on constant reporting to pool subsidiaries on the real costs of their group insurance after pooling. This, in order to avoid local routine rebroking making potential unjust comparisons which often threaten the make-up of many good, well-structured pools.
As well as reporting back savings generated due to the pool, Insurope now habitually invites clients to note that it is also important to communicate to those countries NOT returning a surplus position. In any given year where claims have been such that there is no resulting surplus, it is important to point out that a new opportunity will arise in the following year.
The actual dividend can be paid by Insurope to the HQ in full to be then distributed further by the client itself. Alternatively, Insurope can directly make payments to the various subsidiaries with positive results, if provided with the appropriate banking details for each subsidiary involved. This service provided by Insurope is free of charge.
Typically, for many clients Insurope will provide a matrix on redistribution for allocation towards subsidiaries returning positive results and then processes the transfer of monies directly to subsidiaries as confirmed by HQ instructions.
Parallel to this, HQ clients are encouraged to issue a (timely) communication giving some appropriate succinct background on the results of the Insurope pool for that given year. Up until the receipt of full payment instructions issued by a client to Insurope, all monies remain with participating Insurope Network Partners in local currency, allowing application of local interest rates to be credited on the sum due, up until the point in time instruction for transfer is received.
Any exchange rate operation is also based on the rates applicable locally when the local Network partner receives instructions for payment.
A simplified example of redistribution supposes the following pooling results:
As well as reporting back savings generated due to the pool, Insurope now habitually invites clients to note that it is also important to communicate to those countries NOT returning a surplus position. In any given year where claims have been such that there is no resulting surplus, it is important to point out that a new opportunity will arise in the following year.
The actual dividend can be paid by Insurope to the HQ in full to be then distributed further by the client itself. Alternatively, Insurope can directly make payments to the various subsidiaries with positive results, if provided with the appropriate banking details for each subsidiary involved. This service provided by Insurope is free of charge.
Typically, for many clients Insurope will provide a matrix on redistribution for allocation towards subsidiaries returning positive results and then processes the transfer of monies directly to subsidiaries as confirmed by HQ instructions.
Parallel to this, HQ clients are encouraged to issue a (timely) communication giving some appropriate succinct background on the results of the Insurope pool for that given year. Up until the receipt of full payment instructions issued by a client to Insurope, all monies remain with participating Insurope Network Partners in local currency, allowing application of local interest rates to be credited on the sum due, up until the point in time instruction for transfer is received.
Any exchange rate operation is also based on the rates applicable locally when the local Network partner receives instructions for payment.
A simplified example of redistribution supposes the following pooling results:
Country A: 100
Country B: 200
Country C: 300
Country D: -100
TOTAL RESULT: 500
Adding up all surpluses in the pool produces a sum of 600, however the deficit in country D has first to be deducted to calculate the available dividend.
For the distribution of the dividend, it is common practice to look at the proportion of the results in countries with a positive in relation to the total of all surpluses (after offset of negative results) and then apply this percentage to the available dividend and pay out a proportionate amount accordingly:
Country A had a share of 100/600 or 16.67% of the total positive
Country B had a share of 200/600 or 33.33% of the total positive
Country C had a share of 300/600 or 50% of the total positive
Country D produced a deficit and did therefore not contribute
The actual dividend can therefore be distributed as follows:
Country A 16.67% x 500 = 83.35
Country B 33.33% x 500 = 166.65
Country C 50% x 500 = 250
Country D 0 %
TOTAL DIVIDEND DISTRIBUTED: 500
In such a way, the recoupment of the deficit is spread fairly over the countries with positive results and they are rewarded in relation to their own contribution to the total result. Countries with a deficit do not get anything (if there were no negatives, everyone would receive their own result in such a system). Insurope has an automated programme to calculate this type of distribution for clients.
A second factor in distributing the surplus result can be the percentage of the local result (as calculated above) that multinationals return to their subsidiaries. Many clients pay out a full 100%, whereas some retain a part for HQ management of the pool. In some cases this HQ function is a cost centre with a certain budget. Insurope can also integrate this item into the matrix formula.
As indicated above, one of the most important issues to stress in the distribution of dividends, is a clear communication to the subsidiaries involved, so that they are aware of pooling and the benefits it brings them. The main objective of this is to avoid uninformed decisions being made at renewals which may be disadvantageous to both the subsidiary and the Group.
Insurope can also assist upon request with the drafting of the most appropriate communication to meet the different needs of different clients. v
Country B: 200
Country C: 300
Country D: -100
TOTAL RESULT: 500
Adding up all surpluses in the pool produces a sum of 600, however the deficit in country D has first to be deducted to calculate the available dividend.
For the distribution of the dividend, it is common practice to look at the proportion of the results in countries with a positive in relation to the total of all surpluses (after offset of negative results) and then apply this percentage to the available dividend and pay out a proportionate amount accordingly:
Country A had a share of 100/600 or 16.67% of the total positive
Country B had a share of 200/600 or 33.33% of the total positive
Country C had a share of 300/600 or 50% of the total positive
Country D produced a deficit and did therefore not contribute
The actual dividend can therefore be distributed as follows:
Country A 16.67% x 500 = 83.35
Country B 33.33% x 500 = 166.65
Country C 50% x 500 = 250
Country D 0 %
TOTAL DIVIDEND DISTRIBUTED: 500
In such a way, the recoupment of the deficit is spread fairly over the countries with positive results and they are rewarded in relation to their own contribution to the total result. Countries with a deficit do not get anything (if there were no negatives, everyone would receive their own result in such a system). Insurope has an automated programme to calculate this type of distribution for clients.
A second factor in distributing the surplus result can be the percentage of the local result (as calculated above) that multinationals return to their subsidiaries. Many clients pay out a full 100%, whereas some retain a part for HQ management of the pool. In some cases this HQ function is a cost centre with a certain budget. Insurope can also integrate this item into the matrix formula.
As indicated above, one of the most important issues to stress in the distribution of dividends, is a clear communication to the subsidiaries involved, so that they are aware of pooling and the benefits it brings them. The main objective of this is to avoid uninformed decisions being made at renewals which may be disadvantageous to both the subsidiary and the Group.
Insurope can also assist upon request with the drafting of the most appropriate communication to meet the different needs of different clients. v
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Jimena Atlante, Benefits and Compensation Manager for Amadeus in Madrid, spoke recently at the Insurope 25th General Meeting on her use of Insurope's online Customer Service Manager for more effective development of multinational pooling.