Global programmes – The view from the market

Participants include:

• Tony McHarg, head of multinational – international, AIG
• Kevin Hegel, regional head of global client services and multinational, Allianz Global Corporate & Specialty (AGCS) regional unit, London and Nordics
• Marine Charbonnier, global programmes and captive director, Europe, AXA XL
• Marcel Weiss, global head of international programmes, commercial insurance, Zurich Insurance Group
• Patrick Eder, international programmes underwriting liability, commercial insurance, Zurich Insurance Group
• Kelly Heath, head of business transformation, international programmes, commercial insurance, Zurich Insurance Group

What is being done to remove some of the complexities around establishing/maintaining a global programme? Is greater digitalisation the answer?

Tony McHarg: We are well past the point where we can execute global programmes without also investing in market-leading technology, from a service delivery perspective, a general compliance standpoint and also from a claims perspective.

Any carriers that don’t have a technology platform sitting behind their multinational programmes will be limited going forward. And that’s one of the reasons why there are relatively few players who can truly handle very large and/or complex programmes. It requires building the architecture of the programme, then managing the programme in terms of policy issuance and premium payments etc, and lastly, handling and tracking claims electronically.

Technology is hugely important in terms of adding greater transparency and control, and the insights that can be extracted from the claims data. You can get better information from the losses, which you leverage into being more strategic and then feed all of that back into the first part of the cycle – the architecture of the programme. So it’s also about managing in a far more proactive way, using technology as a partnership and programme enabler.

Kevin Hegel: Global programmes are meant to make life easier for a customer, not more complex. Our customers’ business is already reaching across multiple borders, and establishing a global programme provides them with a compliant and cost-effective solution to ensure their risks are all covered. It allows centralised control over their coverages and therefore should provide peace of mind that where our clients have risks, we are able to support them.

With that said, global programmes provide customised service responding to cross-border exposures, while accounting for ever-changing regulatory and fiscal environments. Every programme client benefits from a dedicated team of specialist underwriters, programme handlers, claims experts and risk engineers. All are there to build the optimal programme structure, to anticipate issues before they arise and to coordinate seamless service delivery. Digitalisation supports those processes and the transparency of a programme, but having the right team, knowledge and structure in place are as impactful in driving a smooth implementation and maintenance.

Marine Charbonnier: Implementing and managing a global programme involves collecting consistent and standardised data on the company’s assets and operations around the world. And yes, digitalisation has a key role to play in overcoming the complexities associated with global programmes.

On the claims side, technology has enabled claims to be settled more quickly and efficiently even in the most challenging of circumstances. If used effectively and alongside pre-agreed guidelines, information on changes in risk exposure and the status of claims can be communicated in a consistent and transparent manner. But tools are only one part of this – you still need clear and regular communication between all parties involved.

Marcel Weiss: Investing in and implementing, for example, robotic process automation, automated or application programming interface solutions were only the very early start of digitalisation and the way we use and share data together with our customers. Looking into the future, digitalisation will further reduce existing complexity even more than today by developing, for example, smart systems, digital product configurators or digital wording libraries. The purpose of that will be not only storing data in user-guided systems in a digital way, but also to achieve full transparency by linking digitalised key data, implementing seamless electronic end-to-end data transfer between all involved parties of a global programme, and allowing real-time data processing globally.

How is the industry tackling the issue of contract certainty? Is the situation improving?

Marine Charbonnier: Contract certainty remains a key talking point as it helps to ensure speedy and effective local policy issuance, and provides centralised control and transparency of local policy coverage. For example, effective local policy issuance starts with ensuring proactive management during the pre-bind phase.

It’s important for global programme insurers and brokers to work closely with clients to undertake deep dives into challenging countries, especially those where local regulations are ever-changing on issues such as exportability, premium payments or local pricing requirements.

Kevin Hegel: There have been a variety of approaches to improve contract certainty across our industry, such as implementing globally aligned wordings (replacing good local standards), reducing repeat data-entry processes, and review of drafted wordings by a producing entity prior to issuance. Knowing what we can and cannot issue in countries well in advance due to prior experience also assists with providing contract certainty. Each of these steps has been shown to effectively improve a company’s contract certainty in its policies.

Patrick Eder: Writing international liability insurance business by way of international programmes across the globe requires high technical and insurance expertise from anyone involved in the process. Since 2016, we have implemented a fully automated contract certainty process to deliver high-quality local policies to customers, and to avoid potential leakage caused by mistakes like missing exclusions. Since this process has been in place and with the experience we have gained, we can see an improvement in the contract certainty ratios – in fact they are now very strong and solid. The implemented process has therefore improved the quality of the local policies.

Tony McHarg: Contract certainty begins and ends with empowerment and accountability across broker, client and insurer. An informed, collaborative and technology-enabled approach is critical, as is early, proactive and ongoing engagement across global and local stakeholders. This facilitates an understanding upfront of the client’s needs and preferences against market practice and requirements – necessary to establish corresponding timelines for consistent issuance and clarity on servicing. It also ensures adequate time to work through regulatory changes, client nuances and the like, to ultimately deliver a meaningful risk management strategy.

How can insurers ensure the quality of service from their networks?

Kelly Heath: Insurers’ networks are typically formed of owned operations as well as non-owned or partner companies. Quality of service is ensuring that both owned and non-owned networks are operating seamlessly and complying with the high standards of the global insurer, as well as delivering against customers’ expectations. Factors like financial strength, compliance aspects, their operational fitness and how well they run their business are essential to know.

Removing system breaks, reducing handoffs and streamlining all the various inputs and outputs that occur, which often lead to errors and delays, and connecting parties to common platforms, will in the end increase an insurer’s ability to deliver quality of service across the network quickly, seamlessly and with very little effort. This includes connecting internally as well as externally with customer and broker platforms, as well as with partners.

With so many parties involved, it is crucial that people are properly communicating with each other, whether it be on the customer, broker or insurer side, and on both the global and local side. The global insurer strives to ensure they have people who understand the need for good customer experience, have the right mindset and keep the customer at the forefront of their minds every day.

Tony McHarg: What we have learned is that the quality and efficacy of multinational service are directly linked to understanding local market requirements, together with relevant network capabilities, insights and relationships, connecting with client, broker and insurer stakeholders across the programme lifecycle and integrated network; and communicating clear programme delivery responsibilities, dependencies, timelines, issue escalation and a resolution framework. All of which must be underpinned by integrated network management, technology and transparency.

Marine Charbonnier: It’s important for risk managers to work closely with their brokers and insurers to understand variations in regulations, such as the differing levels of compulsory local cessions by line of business. While regulation is harmonised, it’s not uniform, and buyers of insurance need to have confidence that they’re complying with the rules in the various countries in which they wish to purchase coverage.

It also goes without saying that the capabilities and expertise that reside within the lead insurer’s global network are a critical success factor. While we’re continually improving our systems and processes to support the needs of our global programme clients, one of the most important lessons we’ve learned during the past decade is the importance of developing and nurturing personal relationships with the people working on the ground in different countries. A successful global programme network relies upon the insurer’s ability to execute quickly and accurately, providing up-to-date information to an overseas office or hub.

Kevin Hegel: There are a variety of approaches and areas an organisation can tackle when approaching the service quality of their network. For example, utilising the real-time data to proactively engage with partners is key. Also, an insurer typically targets the speed of policy/invoice issuance and payment collection. Regular review and tracking globally are used to ensure quality standards within our partner network, together with performing due diligence checks on each of our partners and being in regular contact with them to anticipate any issues, and monitoring of policy wordings being issued to ensure alignment to global instructions.

To what extent can premium allocations and/or retention levels be used to encourage or reward/penalise local operations’ attitude to loss control and the wider risk management objectives of the group?

Tony McHarg: Striking the right balance between global and local risk retentions and premiums is integral to optimising multinational programme design and delivery within an organisation’s wider risk management strategy and related risk financing objectives.

Organisations with relatively mature and established risk management policies, programmes and performance (at both corporate and business unit level) commonly seek to optimise their retentions and self-insurance levels, based on exposures and expected losses, while at the same time reinforcing risk management through local ‘skin in the game’ risk sharing. Often aligned with variable retentions, premium allocations are also used to differentiate local/business unit risk profiles and retentions, as well as wider risk management effectiveness and/or incentivisation.

Achieving the best possible balance between retentions and premiums at both local and global programme level requires that there are clearly demonstrated and detailed risk profiles and risk management programmes, differentiating across an organisation and against wider industry benchmarks.

Marine Charbonnier: A centrally managed global programme can help to strengthen risk management awareness and practices at both the enterprise and local levels. Global programmes often lead to deeper, more effective partnerships between clients and the risk consulting teams who focus on assessing, monitoring and minimising risks, particularly at major locations in different parts of the world.

Global programmes can also help to promote greater safety and enhanced protection among local subsidiaries. When allocating premiums and setting retentions for local operations, for instance, the corporate risk manager has powerful levers for rewarding those subsidiaries that are successfully minimising their exposures and vice-versa.

While hardly a new issue, compliance remains a top question/concern for two reasons. First, regulations concerning local retentions are evolving in many developing countries. Second, governments in mature markets continue to enact regulations impacting particular business activities and risks. It’s therefore important for clients to obtain the right advice early on to ensure compliance for the placement as well as the critical timelines for inception of cover, such as cash before cover, or premium payment warranties.

Kevin Hegel: When it comes to premium allocations, we adhere to the arms-length principal and allocate premiums according to the calculated risks, exposure and scope of cover of our insureds in each country as part of their global programme. If local entities move forward with risk mitigation strategies or engineers to review sites, this can help push down local premium allocations due to risk improvements. Policy retentions have also been shown to help local insureds’ view on loss mitigation if they then feel the impact of each individual loss with a higher retention on their policies.

How can the global programme be sold successfully to local operations and subsidiaries within a group? What are the common sticking points and how can they be overcome?

Kevin Hegel: Being included within a global programme has advantages to a local risk manager. So, positives that could apply for them are: cheaper policy premium for their policy as it was negotiated on a global scale, expanded coverage compared to local market standards, global experts who support claims handling, and a wider assortment of high-quality risk engineers. A common sticking point could be the local insurer relationship, but discussing the above advantages for them locally will hopefully win them over. From the insurer’s side, having local buy-in on the implementation/coverage is key and we’re here to support this process.

Marcel Weiss: International programmes are centrally purchased, managed and coordinated by a corporate customer. This allows full transparency and provides local units with the same comprehensive insurance coverage as the holding company. Integrated local policies are supported by DIC/DIL covers, and then managed and coordinated by a master policy. This harmonises the coverage, helps to avoid protection gaps and provides a holistic view of the insurance programme.

Additional advantages include cost efficiency, one entry point at the insurer’s side, and a strong global team available with cross-functional expertise such as underwriting, risk engineering, claims experts and service specialists.

A fully-fledged international insurance programme has many more advantages than a standalone or coordinated policy approach. And digitalisation is allowing insurers to reduce the complexity of programmes and ensure seamless data and information transfer – not just for large corporate customers but also for international mid-market customers.

Marine Charbonnier: In the current climate, risk managers’ concerns are not just around retention levels or terms and conditions; they’re also seeking support from their partners. We believe that long-term relationships are key to a global programme’s success. Setting up and running a global programme requires specialist knowledge and good communication. We want to understand each client’s business and their evolving risk picture, to help them make the global programme work as a cornerstone of their risk management strategy.

Tony McHarg: Successful global programme adoption and implementation often depends on an organisation’s ability to provide clarity of organisational risk management and risk financing objectives, as well as global and local accountabilities. It also depends on communication of specific global programme alignment benefits and staggered implementation, either by line of business, global business unit(s) or region(s).

As for common ‘sticking points’, transition from local purchase to global programme can be seen as a challenge to local decision-making and local insurer relationships, while individual local policy pricing may be presented as lower than under a global programme ‘allocation’, albeit this can arguably be described as ‘comparing apples and oranges’. Another sticking point can be the existence of locally specific coverage elements that are not similarly reflected in the proposed global programme ‘good local standard’ policy.

These challenges, and likely others, are best addressed through alignment with the success factors discussed earlier, together with tri-party (client/broker/insurer) engagement in the development and execution of a detailed programme implementation plan. This typically includes global and local communication between all parties to address organisation- and programme-specific challenges, through either programme design and/or organisational decision-making.