By Maurice Thomas ,
US Multinational Central Zone Leader
07/11/2023 · 3 minute read
Multinational companies operate in diverse markets across the globe. Their multi-country footprints present a myriad of challenges, which contribute to unique risk profiles that often require a tailored insurance program.
Many multinational organizations have traditionally relied on global insurance programs to manage their risks. For many reasons — including changing business strategies, regulatory complexities, and/or cost considerations — some are exploring moving away from a consolidated approach and instead either purchasing regional programs or setting up standalone programs in certain countries. However, this transition requires careful evaluation and planning to minimize the risks of gaps or overlaps across the distinct insurance programs in an effort to and ensure seamless risk management.
As multinational companies consider moving away from a global program, they should consider implementing five actions to help them avoid gaps and overlaps and continue adhering to local requirements.
Insurance requirements, regulations, and reporting obligations can vary significantly across jurisdictions. Therefore, multinational organizations need to make sure that their insurance programs comply with each country’s specific policies. This requires in-depth research to thoroughly understand the local insurance landscape and avoid potential penalties from local authorities or costly gaps in coverage. Engaging legal and compliance advisors in each jurisdiction can provide valuable guidance during this process.
Moving away from a global insurance program necessitates a comprehensive evaluation of the organization's risk exposure in each market. Conducting a thorough risk assessment can help identify specific risks, vulnerabilities, and potential coverage gaps. Work with your broker or insurance advisor to align insurance policies with the specific risks that are more prevalent in individual markets in an effort to ensure appropriate coverage in each jurisdiction. Engaging local insurance brokers or risk management consultants can help you to tailor your insurance solutions to local requirements and optimize coverage.
Selecting suitable insurance providers in each market is crucial for a successful transition. Take time to evaluate local insurers based on their financial strength, reputation, expertise, and ability to offer tailored coverage solutions. It is important to consider insurers with a proven track record in the relevant industries and markets. Collaboration with a global insurance broker can facilitate the selection process through their network, expertise, and market knowledge.
Maintaining consistency in insurance policies across multiple markets, while accounting for local nuances, is essential. A comprehensive global insurance policy framework can help establish consistency in coverage terms, limits, deductibles, and claims procedures. However, it’s important to make sure that the framework allows for customization based on local requirements. Carry out regular policy reviews and make any needed updates required to adapt to evolving market dynamics and emerging risks.
When moving away from a global insurance program, multinational companies should evaluate alternative risk transfer mechanisms. These could include self-insurance, using a captive, or purchasing local policies. Each option has its own advantages and challenges, requiring a careful assessment of financial implications, risk appetite, and local market conditions. A thorough cost-benefit analysis can help determine the most suitable risk transfer strategy for each market.
Transitioning from a global insurance program is a complex endeavour for multinational companies, demanding meticulous planning and execution. Ensuring compliance with local regulations, conducting comprehensive risk assessments, selecting suitable insurance providers, standardizing policies, and evaluating risk transfer mechanisms are essential for a successful and seamless transition. Aligning insurance coverage with local market requirements can help you to proactively manage risks and protect your operations across the globe.