Associations agree to start formal debate with market to fix global programmes

The agreement came during Commercial Risk Europe’s Risk Frontiers seminar on Global Programmes held at the Grange City Hotel in London on Wednesday that was attended by over 120 people, including over 40 risk managers from across over Europe. During the day-long seminar that generated lively debate, Peter den Dekker, president of FERMA, and John Hurrell, chief executive of AIRMIC, agreed to host a meeting of the leading players in London as soon as possible to try and thrash out the key issues and begin a structured process in search of solutions. The seminar was sponsored by broker Marsh and London-based insurance law firm Clyde & Co, as well as leading insurers in the multinational field–Zurich, Chartis and ACE. Mr Den Dekker said after the meeting that a gathering of senior experts from this group plus the risk manager representatives of FERMA and AIRMIC would ensure a great start to the process.hideIf other leading insurers such as XL, Allianz and AXA can be persuaded to join the effort, along with other international brokers, then real progress could be kick-started, he said. The need for an industry discussion has been sparked because demand for cross-border insurance solutions has risen sharply in recent times as increasing numbers of European companies seek to reduce costs by relocating production to emerging markets and also bolster sluggish home demand by expanding sales into the new markets of Asia and Latin America in particular. International insurers and brokers have invested heavily in this market to help meet fresh demand for solutions. The big insurers are convinced that the multinational market offers them decent growth prospects in a stubbornly soft global non-life market and at a time when domestic demand is flat at best because of low GDP growth in the mature markets of Europe and the US. Emerging markets may offer low cost production options and exciting sales prospects but risk managers who have to follow and accompany their marketing and production colleagues into such markets also find a myriad of problems when they have to sort out insurance coverage for the new operations. Insurance and tax rules in emerging markets are often limited, unclear and are not designed to cater for cross-border companies. The situation for insurance managers is often further complicated by efforts to protect the domestic insurance market in many of these markets by forcing international companies to use local insurers before they can use international coverage. Insurance managers with cross border risks to manage like to use global programmes rather than rely on local managers to negotiate local coverage. This is because such programmes theoretically provide consistency of coverage and greater certainty when claims arise because the buyer is dealing with one big reputable insurer and broker based close to home. But while the insurers and brokers have worked hard to improve their cross-border offering to customers, risk and insurance managers across Europe think that more could and should be done to provide them with the kind of cast-iron certainty that their bosses demand when venturing into new markets. Concern among risk and insurance managers has particularly been sparked by a higher interest shown by tax authorities in many European and overseas territories in how tax is paid on the policies, especially if the premiums are organised and paid centrally via the global programmes. Many European risk and insurance managers believe that compliance should not be used as a competitive advantage by the insurers and argue that understanding the local rules and ensuring that the programmes are compliant should be a fundamental part of the service offered by the insurers. For this reason both FERMA and AIRMIC started efforts to work out whether an industry-wide database of some kind could be created and made available for all risk managers to provide at least a level of comfort. Helen Hayden, risk manager at Prudential, is leading the AIRMIC effort and gave delegates at the seminar an update on progress with the project. Mr Den Dekker said that FERMA had opened talks with Zurich about possibly using its huge database that cost millions of dollars to build using 120 lawyers worldwide in recent years. And on top of these two efforts Günter Dröse, head of ECIROA, the European captive group, last year suggested that perhaps the International Association of Insurance Supervisors (IAIS) could also help provide more clarity and consistency from the top down. David Martin, head of sales & distribution GI at Zurich said the company had been happy to discuss how it could share its information for the benefit of risk managers and was happy to continue the debate. Mr Martin did add, however, that in his opinion leadership in such an effort should be provided by the natural intermediaries the brokers. Praveen Sharma, head of regulatory and tax practice at Marsh, responded by saying that he would be happy to participate in an industry-wide effort that should perhaps be started in the first instance by the risk managers. Mr Hurrell said that AIRMIC would be happy to host such a meeting. “We are very supportive of the idea of bringing together the parties and would love to do so. The more parties we can bring to the discussion the better,” he said. The AIRMIC CEO also suggested that a longer-term goal could perhaps be the creation of a web-based database or depository of all relevant rules that could be updated on a real-time basis as and when rules change. He suggested that this could perhaps be created with the help of the IAIS, the European Insurance and Occupational Pensions Authority (EIOPA) and RIMS, the US risk management association. Mr Den Dekker wrapped up the debate by thanking Mr Hurrell for offering to host the discussion and said that FERMA would certainly be fully involved. In conclusion he said that he sees a three-step process. The short-term effort should be to create a forum by which the key issues could be discussed and a way forward agreed by the leading brokers and insurers. The medium-term goal would be the creation of an industry-wide database as a reference point, as suggested by Mr Hurrell. The longer-term goal would be to pressure the national regulators to help the effort by harmonizing global regulations, clarifying the uncertain rules and persuading them to be more proactive when they explain the rules. –Further analysis of Commercial Risk Europe’s Global Programmes seminar will be reported in next week’s newsletter and a full report will be published in the May issue of the newspaper. Audio and video highlights of the event will also be published on the website and shared with FERMA and AIRMIC. CRE’s next seminar will be held in Brussels on June 23rd and will focus on the Environmental Liability Directive (ELD)—what it really means for risk managers, how the risk should be most effectively managed and the risk transfer options. To secure your place at this event please contact Hugo Foster—Hfoster@commercialriskeurope.com

Associations agree to start formal debate with market to fix global programmes

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