A look at international risk pooling

With SSQ Life Insurance Co. Inc.’s partnership with Allianz Global Benefits last month, the Canadian insurer is looking to provide its employer clients with the advantages of international risk pooling.

Though the concept is more familiar in countries where multinational companies are headquartered, international risk pooling is a way to provide health and insurance benefits using global economies of scale, explains Tim Clarke, president of TC Health Consulting Inc.

Read: SSQ partners with Allianz Global Benefits

While he acknowledges the concept isn’t used very often in Canada, he says it may come up where a company’s head office is trying to make its global benefits spending more efficient. “If we’re overspending in these small countries because we don’t have bargaining power, it’s kind of the logical question: How can we get more bargaining power?” he says. “And [international risk pooling] is the answer to the question.”

The best way to think of it, he says, is to consider a global organization with 40,000 employees, with small groups of staff in multiple countries. The smaller groups of employees will have no local bargaining power, he says. “In some cases, the insurance premiums have a regulated component to them. In some cases, you’re just going to be paying a very conservative premium rate in those countries.

“. . . If you’ve got 40,000 globally that you can combine these little countries with 20 people in them, all of a sudden you can essentially be self-insured across the globe where you couldn’t do that in an individual country because of the risk.”

Read: More Canadians in private insurance drug pools

However, notes Clarke, the advantages for Canadian employers may not be that significant.

“Oftentimes, if you take an example of a company with a U.S. headquarters and a couple of thousand employees in Canada and another 4,000 or 5,000 scattered around the globe in multiple places, all the countries that have small populations want to go into [international risk pooling] because they’ll be able to get a refund out of it at the end of the day,” says Clarke.

“Canada is already paying a very competitive rate. The marketplace here is very competitive for most insurances. They’re not paying a rate that’s going to be substantially more than what it should be. So the advantage to Canada participating in that may not be significant.”