The defining factors

Technology is here to stay and global programmes simply cannot run with it, according to one insurer.

Tony McHarg, head of multinational – international at AIG, believes: “We are well past the point where we can execute global programmes without also investing in market-leading technology from a service delivery and claims perspective, and a general compliance standpoint.”

He said that the numbers are overwhelming. “We administer thousands of multinational programmes and issue tens of thousands of local policies each year. We’ve developed systems that help us deliver enhanced programme management, enabling clients to monitor their programmes’ real-time performance in different geographies, as well as improved integration, servicing and transparency across our global network.

“Any carriers that don’t have a technology platform sitting behind their multinational programmes will be limited going forward.”

Mr McHarg believes that has become the defining factor for choosing a global programme provider. “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.”

Global programmes, however, need more than just technology. Contract certainty has also been a key issue of the past few years, and Mr McHarg’s colleague Rajika Bhasin, multinational associate AIG multinational, said: “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.”

Clients also want to be sure of the quality of service. Mr McHarg said what AIG has learned from years of experience is that the quality and efficacy of multinational service is directly linked to:

• Understanding – local market requirements, together with relevant network capabilities, insights, and relationships
• Connecting – client, broker and insurer stakeholders across the programme lifecycle and integrated network
• Communicating – clear programme delivery responsibilities, dependencies, timelines and issue escalation and resolution framework.

All of which must be underpinned by integrated network management, technology and transparency.

The current hard market environment presents an opportunity for brokers and insurers to create joint, scalable captive solutions that provide benefits both locally and at a global level. And, as Stephen Morton, head of multinational AIG Europe, explained: “As coverage becomes more expensive in the traditional market, one of the greatest advantages of a captive is the ability to craft bespoke terms and conditions at a lower rate.

“Quality of coverage doesn’t have to be sacrificed to protect the bottom line. The best-placed service providers will offer an expansive multinational network with expertise in local market practices and regulatory requirements, as well as the product breadth and ingenuity to provide programme structure flexibility.”

He believes this programme flexibility granted by a captive is often one of its greatest benefits, as the traditional market offerings may not provide sufficient capacity or coverage terms.

“A captive can step in to cover these gaps,” he said, “and the owner can then choose to retain those risks or, or if capacity is available, directly access the reinsurance market.

“For many companies, using a captive to help manage a global programme is a way to centralise and optimise a multinational insurance programme’s retention strategy and meaningfully manage global risk.”

His conclusion is that the most successful insurance programmes maintain a balance of risk retention, traditional and alternative risk transfer, with a strategy that adapts to and achieves a smoothing effect across changing market cycles and risks. “The benefits of self-insurance, including having greater control over risk financing and risk management, as well as customisation of loss control and claims mitigation strategies, remain relevant when prices soften again,” stressed Mr Morton.