More and more businesses are taking advantage of the global trading environment to supplement and diversify income potential. However, along with international expansion comes more complex insurance needs, such as coverage requirements in the new markets.
As businesses expand beyond their home borders, we typically see the different branches of a company purchase separate insurance policies in countries around the world to cover those local exposures. This approach can quickly become unwieldy and gaps can open up in regards to coverage and costs into which a business can inadvertently fall.
International business will become increasingly challenging, particularly when it comes to managing and controlling insurance coverage and costs throughout many different countries of operation.
Some of the key aspects and challenges that a company needs to consider when trying to manage insurance across borders are:
• Ever changing local laws and regulations.
• Different local market practices and coverage requirements.
• Local tax requirements in various countries
• Logistics and cultural variations
• Access to local information
• Increased requirements for proof of locally placed insurance coverage
• Claims settlement requirements
• Local document requirements
What can you do?
In the face of this complexity, a step in the right direction would be to switch from a non-integrated approach to insurance, with multiple providers in multiple territories, to one integrated multinational program where your entire company risk (in all regions) is negotiated and managed centrally by one insurance company. This would give you control of, and consistency in, your international insurance coverage and costs.
Through a multinational insurance program, the central broker and insurer work together, to consider a company’s global risk profile, and global insurance needs and strategy. From there, they build an integrated global insurance structure that takes into account all of those various needs of the insured. This, in turn, provides the insured with consistency and transparency of their international insurance framework and helps build confidence, control, and cost efficiency.
At the same time, any local policy requirements are managed through the insurance company’s global network to ensure compliance with local laws and regulations. Local documentation and policies are issued where required, local insurance taxes are settled, and, in the event of a claim, there will be local claims handling and expertise.
What to look for in a good multinational program
There are several interrelated factors that combine to create a successful multinational program. Some key factors include:
- A Global Network: The insurer should have an established network of insurance partners around the globe to issue local policies and settle local claims.
- Regular communication and updates: It is important to have central access to the status of local policy issuance and claims activity throughout your global program. Therefore, ensure that regular reporting and communication is a service provided by your insurer and broker.
- Understanding of, and access to, local information: When building a multinational program, the insurer should be able to provide updated information regarding local insurance laws and regulations in different territories, such as taxes, policy issuance requirements, any tariff rates and locally required retentions or cessions.
- Compliance: Many companies issue one policy centrally that covers risks in several different countries, which is often referred to as non-admitted insurance. While this may be permitted in some countries, this structure can leave a company exposed to potential fines and penalties where non-admitted cover is not permitted. There is the further risk of local claims not being settled if non-admitted is not permitted.
- Partnership: There should be an effective tripartite relationship between the client, the broker and the insurance carrier where all parties work together to find the best solution for the client. A multinational program can be quite complex with many changing factors, but if the parties involved work as a team, with regular communication, it can run very smoothly and successfully.
For those considering this idea for the first time, setting up an integrated multinational program may seem daunting and a large project, however, there are efficiency benefits enjoyed by those taking the step, including potential economies of scale when it comes to pricing, uniformity of global coverage, and a streamlined approach to insurance purchase.
Find out more about QBE’s Multinational proposition and capabilities.