an exploration into the world of igp and …...an exploration into the world of igp and...

© International Group Program

An exploration into the world of IGP and multinational pooling....

2016 IGP Regional EMEA Employee Benefits Seminar Windsor (UK), 24 May 2016

Bartosz Racino, Senior Account Representative

This presentation was exclusively prepared for the Seminar None of the contents of this presentation may be copied or disclosed to any other party or used for any other purpose than the one mentioned above without IGP's prior written permission. The information in this document does not constitute financial advice and is subject to change. Please contact your IGP Account Manager or [email protected] for more details.. IGP Network Partners operating outside of the United States are not licensed in or authorized to conduct insurance business in New York. The policies or contracts issued by a Network Partner to contract holders abroad are not protected by the New York State guaranty funds, such policies or contracts have not been approved by the New York Superintendent and may not be subject to the laws of New York.


Key Topics

IGP Multinational Pooling

The IGP System

Going Forward Win-Win

Introduction to IGP with historical background,

organisation and key figures


Introduction to IGP

May 20, 2016 3

Historical Background


Introduction to IGP

May 20, 2016 4

Historical Background


Introduction to IGP

May 20, 2016 5

In many countries, the largest insurance companies in the world are IGP partners


Introduction to IGP

May 20, 2016 6

In the other countries, IGP partners with the top players in the market


IGP Portfolio

May 20, 2016 7

Key figures @ April 30, 2016

• Total annual premium: close to 1.6 billion USD

• 10 captive arrangements in force

60 250

420 650

819

75

1400

2520

4258

4889

0

1000

2000

3000

4000

5000

6000

1970 1980 1990 2000 Now

No of Parents No of Units


Introduction to IGP

May 20, 2016 8

Market Share Data - Annual Survey Run via Deloitte

27% multinational

pooling clients

25% pooled

subsidiaries

22% pooled

premium

• 12/31/2014 results reconfirm IGP as one of the largest networks: Multinational Pooling Clients: 27% Pooled Subsidiaries: 25% Pooled Premium: 22%


Key Topics


The IGP System


What is multinational

pooling?


Introduction to Pooling

• What is “Pooling”? Combining... the financial results... of a multinational company’s local employee benefit plans… in multiple countries... into a “pool of contracts”... for international experience-rating purposes

“Accounting procedure which optimizes

the financial efficiency of insured programs globally”

May 20, 2016 10

What is Pooling?



• Making a profit and loss account ...

• for employee benefit contracts ...

• across two or more countries ...

May 20, 2016 11

What is “International Experience Rating”?

Australia Taiwan

Spain Chile UK



• Most insured group employee benefits Death Disability Medical Insured pension

May 20, 2016 12

What can be pooled?



• Challenges for corporations:

Differences in: ‐ Customs ‐ Legislation ‐ Social security

Lack of information resulting in:

‐ Lack of management guidance & supervision

‐ Lack of cost effectiveness

May 20, 2016 13

Multinational Employers’ Needs


Multinational Pooling Meets Multinational Employers’ Needs


May 20, 2016 14

Multinational Employers’ Needs

Cost Savings

Service

Management Control

Information Tax Effectivess


Key Topics


The IGP System


Why is IGP your best choice? How

does it work in IGP, including types of

products and examples.


IGP Meets Employers’ Needs

May 20, 2016 16

Cost-Savings


The IGP System

May 20, 2016 17

First & Second Stage Accounting

First Stage Accounting

• Local Level • No pooling

Second Stage Accounting

• Preserves the terms & conditions of the local insurance contract

• Separate local contracts continue to exist

• Benefit levels are unaffected • Takes advantage of a

multinational company’s worldwide size

• Achieves economies of scale • Reduces risk charges • No implementation charges


The IGP System

May 20, 2016 18

What Happens to the Premium the Subsidiary Pays?


The IGP System

• Example: Country A

• Group Term Life contract Number of Lives Insured 1,000 Premium 200,000 Claims 120,000 Local Dividend 16,000 Commissions 20,000

Premium, claims, commissions, local dividend etc. are paid in local currency. For IGP reporting purposes, these amounts are converted to US Dollars.

May 20, 2016 19

Local (First) Stage Accounting


The IGP System

May 20, 2016 20

Second Stage Accounting (SSA)

Country A FSA (Local Conditions)

Country A SSA

Number of lives 1,000 1,000

1. Premium 200,000 200,000

2. Claims 120,000 (60%) 120,000 (60%)

3. Local Dividend 16,000 (8%) 16,000 (8%)

4. Commissions 20,000 (10%) 20,000 (10%)

5. Expenses & Risk 44,000 (22%) 30,000 (15%)

6. Balance (1-2-3-4-5) 0 14,000 (7%)


The IGP System

May 20, 2016 21

Second Stage Accounting in Two Countries

Country A SSA

Number of Lives 1,000

1. Premium 200,000

2. Claims 120,000

3. Local Dividend 16,000

4. Commissions 20,000

5. Expenses & Risk 30,000

6. Balance (1-2-3-4-5) 14,000

Country A SSA

Country B SSA

1,000 500

200,000 50,000

120,000 30,000

16,000 0

20,000 4,000

27,000 9,000

17,000 7,000


The IGP System

May 20, 2016 22

Second Stage Accounting in Three Countries

Country A Country B Country C Total

Number of Lives 1,000 500 800 2,300

1. Premium 200,000 50,000 120,000 370,000

2. Claims 120,000 30,000 85,000 235,000

3. Local Dividend 16,000 0 0 16,000

4. Commissions 20,000 4,000 2,400 26,400

5. Expenses & Risk (1-2-3-4) 25,000 8,500 15,600 49,100

6. Balance (1-2-3-4-5) 19,000 7,500 17,000 43,500

International Dividend


The IGP System

May 20, 2016 23

Second Stage Accounting Principles

Margin Country A

Margin Country B

Margin Country C


Parent Company


The IGP System

May 20, 2016 24

SSA (Second Stage Accounting) in Three Countries – High Claims


Number of Lives 1,000 500 800 2,300

1. Premium 200,000 50,000 120,000 370,000

2. Claims 120,000 30,000 115,000 265,000

3. Local Dividend 16,000 0 0 16,000

4. Commissions 20,000 4,000 2,400 26,400

5. Expenses & Risk (1-2-3-4) 25,000 8,500 15,600 49,100

6. Balance (1-2-3-4-5) 19,000 7,500 -13,000 13,500



The IGP System

May 20, 2016 25

SSA in Three Countries - Very High Claims


Number of Lives 1,000 500 800 2,300

1. Premium 200,000 50,000 120,000 370,000

2. Claims 120,000 30,000 240,000 390,000

3. Local Dividend 16,000 0 0 16,000

4. Commissions 20,000 4,000 2,400 26,400

5. Expenses & Risk (1-2-3-4) 25,000 8,500 15,600 49,100

6. Balance (1-2-3-4-5) 19,000 7,500 -138,000 -111,500

Loss Carried Forward


The IGP System

May 20, 2016 26

Second Stage Accounting Principles

Margin Country A

Margin Country B

Deficit Country C


Parent Company


The IGP System

May 20, 2016 27

Second Stage Accounting - IGP Principles

Multinational Parent

Company

Ireland Subsidiary

Thailand Subsidiary

Colombian Subsidiary

IGP (John Hancock USA)

Irish Life Muang Thai MAPFRE

Broker Broker


Parent – Subsidiary Relationship

Agreement of Reinsurance & Pooling

Local Group Insurance Contract

Firs

t Sta

ge A

ccou

ntin

g

Seco

nd S

tage

Acc

ount

ing

Pool

ing A

gree

men

t (A

pplic

atio

n Fo

rm)


Introduction to IGP

Loss Carried Forward (LCF)

• Overall financial result: Positive:

‐ Dividend paid. Negative:

‐ Resulting loss carried forward

• A unit’s loss will be carried forward for max. 5 years

May 20, 2016 28

Arrangements for Any Size Account

Full Stop Loss


‐ Dividend paid. Negative:

‐ Resulting loss waived

• Different levels possible

Small Groups Pool (SGP)


‐ SGP dividend paid Negative:

‐ Resulting loss will not be carried forward in client’s account

• Available for < 1,000 lives

• No risk exposure

Captive Reinsurance

• Risk borne by Captive

• Risk ceding only

• Risk ceding & premium transfer

IGP Subsidiary Pool

• Solution if parent company does not have an IGP pool

• Participants’ experience is combined and then included in the Small Groups Pool


The IGP System

May 20, 2016 29

IGP Small Groups Pool

$

+

+

+ +

-

-

-

+

+

$ $ $ $ $


The IGP System

• Some facts & figures (@ 9/30/2015):

• Oldest and largest of its kind in the world Around 245,000 employees >1,600 subsidiary contracts >$330 million premium

• Last 5 year average result (2011-2015): 13.94% of each client’s positive experience

has been paid back as International Dividend

May 20, 2016 30

Small Groups Pool


IGP Meets Employers’ Needs

31

Service


Key Topics


The IGP System


Where do we go from here? How can we help you?


Going Forward...

33

Future Cooperation


Going Forward…

34

Different Steps to Take

Informing the

Subsidiaries & IGP

Plan Implementation

& Pool Expansion

Benefits & Pooling Strategy

Local meetings and proposals


Going Forward...

• Material to facilitate your communication: IGP Country Profiles “The Local Perspective” Poolable & Non-poolable coverages in IGP Sample letters

‐ to introduce the IGP Network Partner to your local management ‐ to accompany the IGP proposal ‐ employee benefits questionnaires

www.igpinfo.com

35

How can IGP help you?


Key Topics


The IGP System


A win-win situation for all parties

involved


Your Benefits Mean the World to Us!

• The expertise and know-how of an industry leader

• We are where you are

• Financially solid, reliable and market-leading partners

• Pro-active account management

• Efficient and high-quality reporting and information

• Diverse and extensive product portfolio

• Arrangements for any size account

• Solutions available for TCNs and Expatriates

37

IGP Pooling – Your Best Choice:


IGP Pooling: A Win/Win Situation

• Cost-Savings: Contracts can generate a potential International Dividend to be shared

with the multinational client Plan surplus can be paid to local subsidiary Important savings possible from well-managed pool

• Information Effective global benefits management Centralized annual accounting

• Cash flow

38

For Multinational Corporations


IGP Pooling: A Win/Win Situation

• Protection for the Network Partner through reinsurance

• Reputation of an ‘international player’

• Major distribution channel (access to new business opportunities)

• Better retention of clients (increased customer loyalty)

• Exchange of knowledge

• New product development

39

For the IGP Network Partners


Key Topics We Discussed


The IGP System


Introduction to IGP with historical background,

organisation and key figures

What is multinational

pooling?

Why is IGP your best choice? How

does it work in IGP, including types of

products and examples.

Where do we go from here? How can we help you?

A win-win situation for all parties

involved


Questions & Answers


www.igpinfo.com

Contact Info

Bartosz Racino John Hancock / IGP Europe

+32 2 775 29 42 [email protected]

Senior Account Representative

an exploration into the world of igp and …...an exploration into the world of igp and...

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