Cross-border business becoming increasingly complex

Regional president of the Ace’s Asia-Pacific franchise Juan Luis Ortega (pictured) has told StrategicRISK that while conventional insurance transactions are becoming more commoditised, conditions for conducting cross-border business are becoming increasingly complex.

For this reason, Ortega recommends Controlled Master Programmes (CMP) for businesses operating across borders. A CMP is an insurance program in which the coverage terms and conditions apply on a blanket basis to all of the insured’s international operations. Local underlying policies are issued overseas to support the centralised program.

Ortega said that CMPs are “never ‘set and forget’ transactions” and that they aim to deliver a combination of tailored services and protection. “They are of necessity dynamic instruments, with an ability to expand, contract and adapt to changing needs on an on-going basis,” he said.

“They are not ‘off-the-shelf’ products, each has to be tailored to best fit the customer’s requirements.”

Ortega added that effectiveness of the delivery of any CMP is largely dependent upon the degree of mutual understanding and transparency between the contracting parties. “Open and continuing dialogue between customer, insurance broker and insurer, about potential as well as immediate needs, enhances flexibility of the CMP,” he said.

Sharing data

Speaking to SR at The Economist’s Insurance Summit 2014, Ace’s European president Andrew Kendrick said that businesses must be more open with their insurers by sharing data and sensitive information if they wish to receive quality solutions when operating across borders.

“The crux of it is the sharing of information so that we can begin to build up a trusting relationship where they feel comfortable in giving us candid information outside of their insurance risks such as what they are going to be doing in the future and their strategy, because it might shape the way we think,” he said.

“Fundamentally it’s about execution on the information the client gives the insurer. If all they get is the standard programme then they will question the point of sharing such sensitive information.”

Kendrick said the importance of ‘big data’ in helping firms adopt quality multinational solutions cannot be underplayed and urged insurers to get more familiar with picking out the correct data to provide realistic solutions.

“Over time, as we inexorably move towards the next decade people will understand better how to extract the nuggets of data because at the moment it’s very challenging to pick out what is meaningful, whether you are an insurer or client,” he said.

Looming risks

Speaking to SR shortly after he succeeded Damien Sullivan as regional president of Ace’s Asia-Pacific division in October 2013, Ortega pointed out the areas of concern be believed were “looming” in the Asia-Pacific region included political, civil unrest and terrorism risks – all of which increase risks for businesses operating across borders.

“Specifically for the multinational client segment, they are seeing continual and varied challenges around regulation and compliance,” Ortega said.

“As a provider to this segment, we have invested heavily in our service and delivery capability, not only in Asia but globally to minimise the compliance and regulatory exposures for our multinational clients.”