A client, insurer, broker and consultant talk about the pros and cons of global insurance
Kevin Bates, group head of risk and insurance, Lend Lease (pictured)
”The biggest issue we had with implementing our international programme wasn’t actually in structuring and setting it up; our broker and strategic partners ensure we’ve got that right so I’m confident about the programme’s compliance.
“The biggest challenge came from our internal people who previously looked after their insurance at a local level and felt like we were taking something away from them [when we introduced the global programme]. The challenge was in helping them realise that they remain a very valuable cog in the wheel, and that even though we now have a global programme and the relationships and compliance are done in head office, they do get a lot of new benefits with the international deal that they didn’t previously. Once they read the policy and see the breadth of the coverage and the limits that we’ve now got are significantly higher, then there isn’t really an argument or a need to sell them the benefits.
“The other thing about international programmes and centralising these things is it’s so much easier to see the full picture in relation to claims to see if there’s any patterns emerging or if there’s any issues. Points of escalation become much easier too.”
Fernando Denes, head of international sales and distribution, Zurich Global Corporate Asia Pacific
”Understanding how international programmes and country insurance rules and regulations work is key [to a business operating successfully]. By approaching risks from a global perspective, coverage is analysed in a flexible and holistic way; a risk manager can consider what options are available in each country, and which countries have more flexible legislation that will allow you to provide non-admitted cover. With this approach, a risk manager can match the coverage or certain aspects of the coverage of the parent company and then balance that with local needs.
“The big benefit that an international programme brings is transparency around DIC/DIL (difference in conditions/difference in limits) or even ground-up coverage on a non-admitted basis. This provides the ability to close any gaps in coverage and clarify where and how claims will be paid.
“For firms looking to centralise their insurance programs, property is a very common place to start as firms can clearly see the cost benefits. But in terms of lines of business that are easier to implement into a global programme, it’s actually financial lines insurance that are simpler.”
Tim Yeates, managing director, Axco
”There are very few firms who have the resources available to guarantee total global compliance. Regulators will, quite rightly, expect total compliance however, so firms need to take a balanced approach to reconciling their capacity with the regulatory necessity.
“Key to balancing the two is understanding, monitoring and managing the regulatory risks involved and the reputational disadvantage of falling short. Having independent, reliable information will allow risk managers to make informed decisions and recommendations based upon facts, data and analysis and, of course, quantification.
“Choosing between global programmes and local policies should be driven by the same fundamental questions: Will the policy pay out when needed, where it is needed, and the amount needed.
“Additional considerations include: what does the local policy cover, is it bespoke to that country, how well are claims processed and, of course, how do costs compare? In many cases, the best programmes are mix of global and local, taking the best of both.”
Bruce Curby, client director, Aon Risk Services
You can’t just say ‘a client who is operating in 20 or 30 countries will automatically fit a global [insurance] programme’. Every one’s got to be treated on its merits.
“Largely what we undertake is a decision tree from the point of view where we track through the countries that the client is in, what the compulsory coverages are, is it non-admitted, [and] what taxes apply. And then [the client] makes the decision for you as to whether they want to go with a global programme and/or include a particular country in a global programme or exclude it and have local policies in place.
“For example, in Malaysia, it’s far more difficult to have a global programme because the legislation largely states that … all the premium needs to stay in the country. So you can write some difference in conditions/different in limits, however, you need to write to the full level of the operations in Malaysia with a local policy.
“The claims outcome also needs to be part of the decision process when structuring and setting up a global programme. The last thing you can have happen is put a global programme in place and then the money from a claim can’t be transferred to reinstate a loss.”