International Programs – Beyond
the Hype
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• Bruce Wineman
Sr. Managing Director
Aon Global Client Network
•
Audrey Rudberg
Insurance Manager
Cargill Inc.
• Richard Friesenhahn
Executive Vice President Head of Specialty Casualty, US and Canada
AIG Property Casualty
• Mike Reeves
Executive Vice President – Global Markets
Crawford & Co.
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What to Expect
After attending this session you should be able to better understand:
• Factors that impact international insurance program performance from
Fiscal, Statutory and Operational perspectives
• Potential impact of poorly designed risk finance programs
• Best Practices to employ in designing, implementing and managing
international insurance programs
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Agenda
 Introduction
 Program Performance – the Other Half
 7 Dimensions of a Successful International Program
 What Can Go Wrong?
 Best Practices
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Program Performance – the Other Half
Fiscal
 Tax
 Payment
• Operational
• Response
• Indemnity
Statutory
 Admitted
 Non-Admitted
 Compulsory
•
•
•
•
•
Legal
Finance
Tax
Compliance
Human Resources
Constraints
• Market – Product Availability
• Cost Considerations
• Market Evolution
• Customs / Practice / Knowledge
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• Change
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•
•
•
•
•
•
7 Dimensions of Successful Program
Design
Balance corporate objectives,
risk characteristics and
appetite, compliance, market
offerings insurer
relationships and available
solutions.
•
•
Information on risk-related
events: Local
policy/exposure data, events,
changes in industry,
business environment,
regulatory, legislative and
other
Designed for efficiency in
program cost, execution and
administration
Mirrors company’s
underlying operating
structure
Tailored to minimize
coverage overlaps/ensure
program responsiveness and
compliance where possible,
Clarity on response of
multiple policies
Based on cross-border business
flows and processes
Address critical issues contractual obligations,
interdependence and contingent
exposures
•
Comprehensive, including
coverage as required, available
and appropriate to address
exposure across multiple
lines/policies
•
Options factor in contractual
obligations, regulatory
requirements, permissibility of
admitted /non-admitted
insurance, compulsory coverage,
and tax.
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What Can Go Wrong?
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WAREHOUSE FIRE
IN FRANCE
• Non-Admitted not
permissible in France
• No Local Policy issued
• First Party Damages in
excess of $50M – PD &
BI
Issue: Program Structure
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Compulsory Insurance
Compulsory Insurance =
Those lines of insurance that
are required by law for
companies operating in a
particular territory – typically
Automobile Third Party
Liability, Work Injury and
some forms of Professional
Liability. Trend towards
compulsory requirements for
other lines, such as
Environmental and D&O, in
certain countries.
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Admitted Insurance
Risk
based in
Country A
Risk
based in
Country A
Policy issued by
Insurer licensed
or registered in
Country A
Policy issued by
Insurer NOT
licensed or
registered in
Country A
= Admitted
= Non-Admitted
“In over 85% of countries non-admitted cover is prohibited or restricted”
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Claims Payments & Tax
Considerations
Non-Admitted
Loss
Proceeds
Parent
Entity
("P")
Loss proceeds
(collected by P on
behalf of FS)
Foreign
Foreign
Subsidiary
Subsidiary
(“FS")
("FS")
Capitalization
(If P only insures
Financial Interest)
Income Tax?
Frictional Cost
Income or Other Tax?
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Program Design Tool
•
Explores recommended approach for
multinational program, considering local
regulations, tax, coverage and claims issues.
•
Provides risk managers with
comprehensive/holistic view of variables
impacting their decision to insure their
companies’ risk exposures locally or globally.
•
Illustrates how particular exposures, business
strategies and risk sensitivities impact a
multinational’s program structure.
Available at: www.aig.com/multinational/pdt
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Sample Country Review Workbook
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WAREHOUSE FIRE
IN FRANCE
• Non-Admitted not
permissible in France
• Local policy issued under
Primary Liability program
with limits at US$1M
• Third Party Property
damages over US$6M
Issue: Coverage
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WAREHOUSE FIRE IN
FRANCE
• Operation had expanded
rapidly.
• Error is calculating
exposure based on
incorrect exchange rate.
• Values reported at US$9M
actually over $90M
Issue: Communications
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INSURANCE
PREMIUM TAX
• Global company technically
headquartered in Switzerland
for tax purposes, but majority
of operations in the US.
• Liability policy issued by global
insurer at direction of US Risk
Management with Master
policy issued in Switzerland
and local policy issued in US.
• Premiums paid by Swiss
management company.
Issue: Compliance
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Tax Audits
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1
7
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FLOOD IN THAILAND
• Sub-Contractor Location
• Multiple sources of
components
• Significant Damages
Issue: Address Exposures
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Transfer Pricing
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FLOOD IN THAILAND
• Sub-Contractor Location
• Multiple sources of
components
• Significant Damages
Issue: Efficiency
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Developing the Right Solution
•
Listening to the client requirements
•
Building the right solution/process jointly
•
Supporting brand and business strategy
•
Custom systems structure, data and MI
•
Delivering expert project management and implementation
•
Building relationships and working to the same objectives
•
Focus on program controls
o Financial
o Quality
o Data
o Process
o Feedback
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Response – implementation (1)
Global crisis team
agreed
Project plan
developed
Business critical tasks
prioritised
First notice of loss/
intake – scripts:
phone, dedicated
email, web portal
Claims management
and reimbursement
processes
Treasury management
– bank accounts,
currency, who &
where
Activate global web
claims system
Operational resource
both local and from
other countries to cover
language, culture,
licences, visas,
immunisation, travel,
accommodation,
incident control centre
Legal, data privacy
and integration of
local Government
requirements
Data capture criteria
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Response – implementation (2)
Implement 24/7
online access.
Risk management
information system –
MI report design,
distribution &
frequency
Systems initiated with
defined triggers in
place
Resource ‘Ramp Up’
to accommodate
surge volume
Training programme
implemented
Designated CAT
personnel with ability
to mobilise as
required
Supply chain
utilisation with access
to approved and
accredited
contractors
Transparent client
communication
channels throughout
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Risk Management Best Practices
Assessment
 Know the company’s footprint and operations
 Seek knowledge partners and service providers with a
comparable footprint (Brokers/Insures/Claim Adjusters/Loss
Control)
 Data collection: what, who and how
Evaluation
 Establish a Risk Financing/program strategy with respect to
international operations
 Utilize consistent methodology for determining where local
policies advisable
 Determine local service requirements (Broker, policy issuance,
invoicing, Engineering/Loss Control, claim adjustment)
 Document decisions
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Risk Management Best Practices
Implementation
Communicate
 Objectives and Program Structure
 Local service expectations/deliverables
 Roles/Responsibilities, including local decision rights
 Processes/procedures for invoices, policy
receipt/acceptance, document retention, claims reporting
Monitor
 Changes in country rules or non-insurance situations with
potential impact
 Service deliverables, regularly
 Outcomes and issues with key stakeholders
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Broker Best Practices
Assessment




Risk Management objectives
Communications process/protocols
Compliance Framework and threshold for materiality
Claims Scenarios
Evaluation







Regulatory constraints
Program structure options
Market capabilities
Opportunities for consolidation/improvement across lines
Challenges
Service scope and model
Document decisions
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Broker Best Practices
Implementation/Monitoring
 Marketing plan for Global and Local lines
 Account Service Plan with milestones
 Risk Management Manual and other documentation
available to all stakeholders
 Open Items/Stewardship Reports
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Insurer Engagement Best Practices
Communicate
Risk financing strategy
Program structure objectives including local policy coverage and
service requirements
Exposure Information
Evaluate program structure options and identify potential
constraints
Timeline and monitoring for implementation
Off- Cycle Meetings
Implementation postmortem
Upcoming changes in exposures /operations
Exchange of knowledge of specific country changes
Review of loss trends and mitigation activity
Specific claim updates
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Insurer Engagement Best Practices
Roles/Responsibilities
 In-country
 Claims
 Points of escalation
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Claims/TPA Best Practices
 Crisis team agreed in advance.
 Roles/responsibilities/processes/escalations etc.
agreed
 Understanding of potential regulatory and compliance
requirements
 Pre event planning with partners around ‘common
events’ in specific geography. Dry runs to identify
potential process problems
 ‘One off’ non major events – clear protocols subject to
geography/event specific requirements pre agreed
with partners. Empowered management available to
commit globally
 ‘ One off’ major events – assigned and empowered to
sign off commitments and timelines subject to needs
around incident type
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Claims/TPA Best Practices
 Protocols signed off , secured and kept current ready
for activation. Core team all trained/aware of global
assignment/commitments and ability to deploy
 Agreeing core protocols around incident types with
partners – within first 60 days
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Toward Program Performance
1
Establish Clear Risk Finance / Structure Objectives with KPI to measure
success
2
Utilize Pragmatic Process to Establish Options to Meet Objectives and
Document Decisions
3
Ensure Strong Formalized Communication with Overseas Local Business Units
Relative to Risk Management
4
Ensure Linkage With Internal Stakeholders Including both
5
Clearly Document Program Intent
– including roles, responsibilities and financial considerations
6
–Management
–Operational
Monitor & Measure Performance
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Questions, Final Comments and
Contact Information
• Bruce Wineman/Aon Global Client Network
Telephone: 212 441 1633
e-mail: Bruce.Wineman@aon.com
• Audrey Rudberg/Cargill Inc.
Telephone: 952 742 7296
e-mail: Audrey_Rudberg@cargill.com
• Richard Friesenhahn/AIG
Telephone: (212) 458 3593
e-mail: Richard.Friesenhahn@aig.com
• Mike Reeves/Crawford & Co.
Telephone: +44 (0) 207 265 4096
e-mail: Mike.Reeves@crawco.co.uk
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KEEP THIS SLIDE FOR EVALUATION
INFORMATION/MOBILE APP ETC.
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