Global insurance programs must be tailored to a company’s goals and exposures.
RISK FOCUS: REGULATORY
Peril and Opportunity
Shifting strategies are
influencing the way
their global programs.
By Alex Wright
In this increasingly globalized world, more and more companies are xpanding their boundaries, trading across different time zones and borders and moving into new territories. Many have already built up an extensive network of offices, operations, assets and personnel across the globe.
But they also face a multitude of challenges in establishing and maintaining
These can include differing business customs and cultures, political and legal
environments, tax and insurance regulations, languages, geography and climate,
not to mention cyber attacks and terrorism.
“There’s never been a time of greater peril or opportunity,” said Nick Batten,
vice president of global services, FM Global. “The pace of regulatory change
that we are seeing in the financial markets across the world is faster and more
capricious than ever before. Companies need to adapt accordingly to meet those
And with 94 percent of companies saying they plan to grow their operations
outside the U.S. within two years, according to a recent survey by The Hartford,
that risk is only going to increase.
There are three main insurance options available for a multinational: local
policies, a single global policy or a controlled master program (CMP).
The local policies are issued by a licensed-admitted local broker or carrier to
insure against risks in that particular country, whereas a single global policy or
master policy is generally issued in the insured’s home country and is intended to
cover all of its worldwide risks on a non-admitted basis.
A CMP combines both local policies and the single global policy to provide
comprehensive coverage and to ensure there are no gaps.
Which option a company chooses depends on the size of its global footprint,
exposure, risk appetite, approach to local retention and deductibles, and level of
central decision making.
“Not one size fits all,” said Praveen Sharma, global leader, Marsh’s Insurance
Regulatory & Tax Consulting Practice. “It all depends on the particular client,
their business model, exposure and risk appetite.”
Before entering into a global insurance program, Sharma said companies
should first work with a knowledgeable broker and insurer to determine their risk,
Another key consideration is the
growth of third party risks within the
supply chain, said Kathrin Howard,
practice leader, Allianz Multinational,
“Companies need to understand all
the components of their supply chain
and find a program that can help them
to mitigate that risk,” she said. “It’s
also important to have a back-up plan
“Multinationals should be
aware of the potential pitfalls
a lack of local coverage
could create in the areas of
compliance, claims, income
tax, proof of insurance and
—Carol Barton, president, AIG Multinational
• Global programs should reflect
a company’s exposures and risk
• Supply chain risks must be
factored into global programs.
• Lack of local coverage can create
issues related to compliance,
claims and tax.