Intercompany Pooling in the SAO

I have a few questions on these, here's a scenario: Let's say a company has material Intercompany Pool reserves and material Involuntary/Voluntary Pool reserves:

The Scope will require a specific disclosure on the Intercompany Pool, but not for the other Voluntary/Involuntary one?

Similarly, the Relevant Comments require a disclosure on the Voluntary/Involuntary pool, but not necessarily the Intercompany one?

Last question, we'd list these as separate items on Exh. A and Exh. B right? We don't combine them at all?


  • Basically that's correct. According to COPLFR:

    • A description of inter-company pooling is required in the SAO and could be included in the Scope section according to COPLFR. (I'm not sure where it would go if not in the Scope section so I would just assume that's where you'll find it.) You would not put voluntary/involuntary pools here because that's specifically discussed elsewhere.

    • For voluntary/involuntary pools, the amounts are disclosed in Exhibit B, Item 10. Comments on this disclosure item should go in the Relevant Comments section. Regarding materiality, it should always be disclosed if material, but there might be situations where disclosure should be made even if the amounts are not material. See Situation 3 in section 5.6.2 of COPLFR. An example may be if in 2019, reserves are material then in 2020 they aren't. Someone reading the 2020 SAO and not finding any comment about the particular pool may not know whether they just couldn't find the comment (and the item is still material) or it was accidentally omitted, or if it really isn't there (because it isn't material.) You would not put inter-company pooling here because that's specifically discussed elsewhere.

    • Regarding Exhibit A and B: There are specific required line items, 9 items for Exhibit A and 14 for Exhibit B. Exhibit A is basically a summary so everything on the books is combined, with a few things like long-duration contracts listed separately. On Exhibit B however, you would have inter-company pooling (possibly as an attached document showing the lead company's inter-company pooling information) and voluntary/involuntary pools (item 10) broken out separately.

    You might already know this but if you want to find all old SAO exam problems related to pooling, go to the link below, then do cntrl-f, and just type "pool" in the search box that comes up. It will highlight every old question that has the word "pool" in the description. You can get a good sense for the kinds of questions they like to ask by doing that.

  • Can someone explain to me the difference between a Intercompany Pool and a Voluntary/Involuntary Pool? I think understanding the difference would really help the difference in treatment to make more since.

  • Sure, here's a quick definition of each:

    intercompany pooling: a common arrangement among companies in a group in which each of the participants fully cedes all of its business to the pool leader, and then each participant assumes back a specific percentage of the total.

    There is a Schedule P exam problem on intercompany pooling as well as some practice problems available in the wiki at this link. Once you're there, click on the practice problems.

    involuntary pool: Involuntary pools and associations represent a mechanism employed by states to provide insurance coverage to those with expected higher than average probability of loss who otherwise would be excluded from obtaining coverage. An example is an ARP or Assigned Risk Pool discussed in the Cook reading. Here's the link to the relevant section of the wiki:

    voluntary pool: A voluntary insurance pool is a group of companies that have come together to spread the risks across a larger base. This could be to provide extra protection against catastrophes, or as a way to underwrite larger risks that individual members would be able accept on their own.

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