Going ‘glo-cal’–Royston Ford, Cunningham Lindsey

However, the need to be ‘glo-cal’ is vital to the effective delivery of a global risk and insurance programme – adapting it to meet the specific needs and expectations of customers in new territories, and ensuring the compliance of operations with local regulatory and legal requirements. This need for a local solution is as vital in the provision of loss adjusting as in any other part of the programme.

We accept that the true worth of an insurance contract is only discovered when a claim is made, and that is never truer than in the case of the local insurance contract in a global programme. If a business contracted with suppliers on particular terms in Country A, it would never imagine for a moment that the same contracts could be deployed without amendment in Country B. However, this is a common misconception in relation to claim handling protocols between different jurisdictions in the global risk programme and one that can lead to mayhem, gross additional cost and even regulatory or criminal penalties being incurred by the local business unit or by the fronting partner(s).

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Real life example

Take, for example, this real-life case: a global manufacturer of consumer electronic equipment had a global risk programme that was regionally devolved to match its operational footprint. The EMEA business was expanding east beyond Europe, requiring the global carrier to seek new partnerships with fronting insurers in territories with complex regulatory requirements. As it was possible to reinsure 99% of the local risk, the global programme carrier (with the backing of the local carrier) wrote a local policy on the same terms as the original with full claims control resting with the reinsurer.

The manufacturer reported a series of inland cargo claims to its global carrier, who appointed overseas expert adjusters to investigate the losses and to report back to them. In due course, the carrier made a settlement decision and attempted to pay its client. Only at this time was it appreciated by all parties that exchange and accounting regulations in the territory concerned were such that the manufacturer could not simply remit cash to its local business and that the non-admitted global carrier could not pay the claim directly, as to do so would be unlawful.

So, somewhat belatedly, attention was turned to the local policy and carrier. This revealed an even greater level of complexity. Some of the key issues included:

• An unauthorised foreign adjuster had conducted the investigation of the losses and his reports could not be presented to the local carrier.
• Local law required the presentation, with the claim, of original or notarised original copies of key documents, but these had not been secured during the investigation.
• The original transit policy provided a basis of valuation on the goods of Cost plus, an uplift of 30%.This is a normal commercial provision in Western Europe to allow for extraneous costs and overheads, but one that was prohibited by local law.

Taken together, these points represented a perfect storm of an unenforceable policy, some un-presentable claims and the fronting partner unable (however willing they were to help) to offer any mitigation because settlement by them without full underwriting and claims compliance would be in contravention of local regulations and would result in enforcement or punitive proceedings.

The solution to the problem was to do – rather late in the day – that which should have been done at the outset. The global carrier appointed a global loss adjuster with a local admitted operation to sit down with the local carrier and investigate the losses from scratch, in accordance with local law and practice, leading to proper settlement of the claims.

Painful process

What emerged from the painful process of setting up a local insurance programme after the loss was that an early dialogue with the local carrier and loss adjuster would have led to solutions to all the issues experienced. The policy basis of valuation was amended to include specific costs that could be documented, with an uplift that was permissible in local regulations. It also transpired that local regulation allowed insurers to opt out of the requirement for original documents or notarised copies: a clause simply had to be added to the local wording.

The local adjuster was written, from first notification, into the local claims handling protocol and was able to guarantee a fully compliant response to all local claims that was, with the support of its own global business, fully transparent to both the local and the global carrier.

In conclusion, the right local risk and claims partners are crucial to the local deployment of a global risk programme. In the area of loss adjusting, the regulatory considerations for international loss adjusting firms working in foreign jurisdictions is a key issue. Where there is the need for a local license for the adjuster, the penalties of non-compliance are very serious – not just for the adjusters, but actually the insurers who engage them are at far greater risk.

There are now fines for insurers who use adjusters that do not have licenses and the insurer can’t use the evidence of an unlicensed loss adjuster in court. So, the core principles of the global risk strategy are right for a global business, but each territory needs to be a bespoke and finely tuned component of the whole.