Global programmes provide challenges but the best solutions say risk managers–France

Participants of our European Risk Frontiers survey also stressed that captives, if properly used, provide a valuable option when managing cross-border risks. “Global programmes remain the best way to transfer risks located in different countries. However, local regulations are challenging those programmes,” said Gilbert Canameras, President of AMRAE and Head of Financing and Risk Management at mining and metallurgy company ERAMET. “We have plants in 18 countries, and offices in 20 others. Therefore I do not see how it would be possible to integrate their insurance coverages without a global programme,” said Michel Blanc, a member of AMRAE’s board and the risk manager at chemical multinational group ARKEMA. “We would have to set up 18 industrial programmes and then 20 more programmes for the business part of our activities. It is clear that for companies like ours that work in several countries global programmes are indispensable,” he added.hideBut he also stressed that the legal and compliance aspects of global programmes are a frequent source of headaches. “One difficulty is that every year someone tells us that there is a new country where a local policy must be issued, but our insurers cannot agree among themselves on whether this is really the case,” Mr Blanc said. “And then we have to arbitrate between them and decide whether a local policy is required or not.” One solution is to work with insurance partners who are able to provide comprehensive services around the world, he pointed out. “What we do is choose a broker that has offices in the same countries where we operate. We also choose one lead insurer that is capable of issuing local policies and they must also be present in many of the countries where we are,” Mr Blanc said. “That means that in each country the subsidiaries will have interlocutors with the broker and the insurers that will issue local policies when they are required.” Compliance is not the only difficulty when it comes to purchasing local coverages that will complement a global programme. Sometimes it is difficult to find the coverage that a company needs. “Some local markets do not give us, at the current time, sufficient confidence and capacity in the coverage of risks that we face there,” Mr Canameras said. Working with local teams is another sensitive point, the risk managers said. Well thought-out global programmes demand a lot of work at the parent’s headquarters, they added. “The advantages of global programmes include the optimisation of costs and the purchase of broader coverages that have an effect on the whole group,” said Sophie Mauvieux, a member of AMRAE’s Scientific Committee and Group Risk & Insurance Manager at IT security group GEMALTO. “You can also achieve consistent coverages for all activities and locations of the group around the world. Global programmes also provide greater stability in your relationship with insurance markets and create a global approach to reporting and control of costs, losses and so on.” “On the other hand, they present us with challenges too. It is not easy to fully understand the risk and insurance management strategy decided at the corporate level when you are based in a remote little subsidiary. Levels of retention and premium allocation rules remain topics of discussion between corporate risk and insurance departments and local teams,” she added. According to François Malan, a member of AMRAE’s board and Head of Risk Management at real estate management and development group Nexity: “Global programmes enable risk managers to optimise the costs of coverages. The main difficulty is to find insurance partners that are capable of providing the same kind of service in terms of policy underwriting and loss management in all the countries where the company operates. Not many insurance companies are capable of doing that. Also, it is necessary to regularly evaluate whether the programme is working well. So global programmes are a good option for risk managers, but they still require a lot of management work.” It is important not to cut corners in the planning stage of global programmes, warned Michel de Pommereau, vice-president of AMRAE and Head of Insurance at GDF Suez Energy Services. “Global programmes have to be cleverly designed in order to find the best solutions for the company’s interests,” he said. “We do not want to have a global programme for the sake of it, we want to adapt it in order to achieve the best conditions for the transfer of risks.” It is important that insurance buyers are aware that not all coverages are best bought on a global basis. The suitability of a programme must be analysed carefully according to the circumstances, said Mr de Pommereau. “Global programmes are more adequate for some kinds of coverages than for others,” he pointed out. “For instance, in the case of motor fleet, it is not worth having a worldwide policy. We have a huge fleet of vehicles in France and as a result we have decided to buy a policy that encompasses a number of countries, but not all of them. Also, in property damage we always need to seek clever ways to obtain the best prices and transfer conditions in all the countries where we operate.” “One thing that is important to take into account is the cost of the capacity in relation to each country covered by an international programme,” Mr Malan said. “Sometimes the analysis of the cost of purchasing a policy in each country shows that it is more interesting to do it in some than in others. Another item to be evaluated is the impact of tax on the purchase of capacity. Then we can build a programme to purchase insurance according to such factors.” Reliable insurance partners are also important when a claim is made under a global programme, Mr Blanc said. “When there is a large loss that is covered by a global programme it is important to choose the right loss adjuster to work on it,” he pointed out. “It must be someone that knows well our activities and our organisation. We make one or two of our staff available in situ to answer any questions that the loss adjusters may have, and we organise regular meetings with them. By following these steps, things tend to work well.” Mr Blanc also stressed that captive companies remain a valuable option for companies with a global footprint. “Captives must retain the difference between the level of deductibles that subsidiaries are able to retain and the level from which insurance takes place. Thus the captive can stabilise the deductibles of subsidiaries according to their size,” he said. “The captive can also take the risks that are not possible to transfer to the insurance market.” His company’s captive also has a more specific use. It enables the firm to take advantage of a mutual insurance system that provides comprehensive insurance coverages. “We use our captive to be able to enjoy the services of OIL (Oil Insurance Limited), the mutual insurer of the oil industry for off-shore risks. As OIL does not have a licence to operate in Europe, we have created a captive and we buy reinsurance with OIL through it. That is the simplest way, and a legal one, to work with OIL.”

Global programmes provide challenges but the best solutions say risk managers–France

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