PERSPECTIVE ADVERTISING FEATURE
Being multinational isn’t just for Fortune 500 companies anymore. Technology and ease of travel have made the world
smaller than ever, and thriving in a
global economy demands following
business opportunities everywhere, from
Tennessee to Thailand. According to
The Hartford’s Q2 2017 pulse survey, 80
percent of mid-to-large size companies
in the U.S. are doing business overseas in
one way or another.
But while companies must move to
take advantage of opportunities, they
don’t always realize the new world of
legal and regulatory risk they enter
when they do so — or the complexity of
mitigating that risk.
“There’s no global, harmonized
regulatory system,” said Alfred
Bergbauer, head of Multinational
Insurance, The Hartford. “You have to
be mindful of the insurance laws and tax
environments in each country. Many
smaller organizations don’t realize the
consequences of not complying with
Regulators routinely scrutinize
the insurance of foreign operators —
especially policies not issued locally.
“When businesses don’t buy local
insurance, it deprives that country of tax
revenue and robs regulators of oversight
over the underwriting criteria and
adherence to local law,” Bergbauer said.
Regulators are increasingly auditing
brokers, insurers and insureds to
identify unlicensed insurance, which can
result in steep fines and other business
risks that many smaller organizations
may not be aware of, including payment
of back taxes, fines and disruption of
business if inventory is impounded.
In most cases, Bergbauer said, middle
market companies are either uninsured,
under-insured or improperly insured for
multinational exposures. With so many
middle market companies expanding
their footprint, how can so many lack
“There is a gap in multinational
solutions geared toward the middle
market,” Bergbauer said. “And many
brokers serving the middle market are
not well-versed in the business activities
that draw multinational exposure or in
the solutions available.”
THREE LEVELS OF MULTINATIONAL RISK
The level of multinational exposure
— and the type of solution needed —
varies depending on how a company
operates abroad and how deeply they
engage with foreign markets.
Businesses should assess the three levels of multinational risk.
Are You Global-Ready? Most Companies
Underestimate Multinational Risks
These are companies that send
representatives abroad to meet with
potential clients, partners, suppliers or
buyers, or to attend training seminars
Companies in this segment aren’t
buying or selling a product or service
in a foreign country, and they don’t
have any overseas locally insurable,
foreign operations (permanent physical
operations, local employees and/or
registered entities). Their primary
concern is travel risk.
“Many organizations assume their
workers’ compensation policy will
cover health and safety exposures,
but most U.S.-based coverage does
not apply to all incidents abroad,”
In addition to a workers’ comp
policy, companies may need coverage
for death and dismemberment, kidnap
and ransom, and access to a 24/7
crisis hotline and emergency medical
assistance. Employers that lack these
resources could face legal liability for
not fulfilling their duty of care. But
beyond legal obligation, it’s simply
the right thing to do to provide these
coverages and services to employees.
This segment includes businesses
that not only send employees overseas
but also sell products or engage in
installation or repair work overseas.
For these activities general liability
and/or product liability exposures
increase. These companies are selling
products or services abroad but don’t
have a physical foreign location.
“A very high percentage of U.S.
companies that don’t purchase a
multinational policy believe that their
domestic policy covers product liability
risk around the world,” Bergbauer said.
“But U.S. liability policies generally
respond only to products manufactured
or sold in the U.S. An injury that occurs
overseas may not be covered by a
domestic policy, even if the lawsuit is
brought in U.S. court.”
To seal those gaps, exporters should
supplement their domestic policies with
a multinational solution that extends
coverage to product and legal liability
claims incurred overseas, regardless
of where a triggering event occurs or
where a lawsuit is filed.
3. Controlled Master Program
In addition to sending employees
overseas, selling products or
performing installation and repair work
abroad, clients in this segment also have
foreign legal entities, local employees
and/or fixed assets overseas as well.
As legal entities within foreign
countries, they are often required
to purchase policies from the local
market that are written in the local
language and adhere to local laws
and practice. Since no two countries’
regulatory frameworks are the same,
understanding and complying with
good local standards in multiple nations
can be a liability-fraught headache for
These entities can best mitigate
their risk through a controlled master
program, where a U.S. master contract
acts as the backbone, supported by
multiple locally admitted policies.
Where local coverage falls short, the
master policy fills in the gaps.
ASKING THE RIGHT QUESTIONS
Large corporations fitted with risk
management, legal and compliance
teams may be aware of their
multinational exposures and have the
wherewithal to get a controlled master
program in place.
For mid-size companies, these risks
often go unaddressed.
“Forty-one percent of mid-to
large-size companies have had no
communication with their broker about
international exposures1,” Bergbauer said.
There are five critical questions every
company should answer to determine
their level of multinational exposure and
what type of solution they need:
• Do you have or send employees overseas?
• Do you sell products overseas?
• Do you have goods warehoused or
equipment located overseas?
• Do you have international locations?
• Do you have foreign suppliers or customers?
“If you answer yes to any of these, find
a carrier who can help,” Bergbauer said.
SOLUTIONS AT EVERY LEVEL
By asking the right questions, The
Hartford works consultatively with clients
to bring sophisticated multinational
solutions to companies of all sizes.
“By understanding their specific
business activities, we can shape a
solution that meets clients’ needs, which
can involve localizing an umbrella,
increasing local limits or adjusting limits
in the master policy,” Bergbauer said.
The Hartford is committed to
helping customers meet their risk
management needs globally.
To learn more, visit:
1 The Hartford’s Second Quarter 2017 Pulse Survey
Spectrum of Coverage
Foreign Insurable Operation