As companies expand their operations across international borders, there are many factors that can affect their multinational insurance coverage. Global Risk Manager talks to Laura Vest, EVP, head of Chubb multinational insurance, about key considerations for multinational companies when their growth takes them abroad.
What challenges do multinational companies face in terms of insurance coverage?
By necessity, global programmes are complex. Risks can vary in severity across borders, and a risk factor in one location might not be a consideration in another. It is important to evaluate the legal requirements of different countries and territories, as well as the ramifications for non-compliance, like business impact, work interruption, and reputational risk.
Multinational corporations aren’t always well versed in the risk factors from country to country, so the insurer must understand both the client’s operations and exposures as well as local standards for the placement of insurance. For Chubb, this means we are where our clients are, with offices in multiple countries and people on the ground across the globe who understand the local laws and cultural customs.
How has the multinational insurance landscape changed in the past five years?
The past five years have seen immense changes in the insurance industry and the global market as a whole, and the industry has become much more complex than it was even five years ago. Organisations have so many opportunities to expand across different borders and to establish business operations in new countries and regions.
This is a dynamic time. It brings increased complexity and additional complexity creates challenges for both multinational insureds and their insurers. Countries around the world are adding and expanding local requirements and regulations. A couple of examples are increasing anti-money laundering (AML) documentation requirements and time-sensitivity around certificates of insurance. Compliance risk is top of mind for our customers.
Are there any trends you are watching closely?
There has been a trend toward more severe claim outcomes all over the world. For example, in the US, outsized liability awards heavily influenced by social inflation are becoming more common. But there are always additional factors in play – litigiousness, inflation, and cost variability have different levels of impact from region to region.
Supply chain disruption is another trend I’ve been following. Thankfully, supply chain disruption is not as prevalent today as it was over the past few years. Companies are better at determining where the gaps are and developing solutions that maintain the flow of business. That said, supply chain disruption is still something organisations need to consider and they should be building resiliency into their operations in the event they face increased costs or delays in manufacturing or delivery.
Finally, there is the evolving regulatory landscape, which is becoming more complex in response to increased enforcement of rules and regulations by local insurance regulators. There are many factors influencing this trend, but there are two we’re watching specifically. The first is the growing cost of financial crimes, which has warranted more strict guidelines around AML documentation. Second, we’re seeing a strong move toward market protectionism through local insurance rate and premium dictates and local mandatory retentions, which in turn is leading to reduced exportability driven by regulation.
What advice would you have for a multinational organisation seeking a new insurance partner or multinational insurance programme?
Diligently evaluate the insurer’s expertise. How long have they been serving multinational customers? What dedicated resources – underwriting, risk engineering, claims management, global network, global services – do they have? Do they offer service transparency? You need a partner who has the experience, the knowledge, and the boots on the ground to help your business grow while minimising risk. You also need a partner who can scale your programme as your business continues to expand.
Additionally, I would urge multinational organisations to be extremely well versed in their own business practices and be able to communicate their needs clearly and effectively to their insurance partners. They need to be experts in their own business, and they need to be able to tell their story so that their insurance partner can tailor their multinational programme to their business. The road goes both ways!