8 Questions for Dawn Miller
The United States is widely considered the land of opportunity for a reason. Many international companies recognize the benefits of staking their claim in the U.S. market, but the regulatory and insurance landscape can make the move challenging. In this Q&A, AXA Insurance Company CEO Dawn Miller discusses the unique risks facing inbound firms, and how insurers can ease the transition.
R&I: Why is 2018 a particularly attractive time to expand into the U.S.?
Dawn Miller: The U.S. has always represented a good opportunity for foreign firms because of the size of the market — in 2016, the U.S. attracted $3.7 trillion in foreign direct investment. But there are a few trends that make this year a particularly good time to make an international move. For one, unemployment is at record lows and the economy remains on a slow but steady upward trajectory.
There’s also the potential for recent regulatory and tax reforms to foster domestic manufacturing and ease international trade. Additionally, Chambers of Commerce across the U.S. are always seeking to pull in new businesses by offering a variety of services and incentives.
R&I: What sectors or markets are most attractive right now?
DM: Most foreign investment in the U.S. is focused on the middle market. According to the National Center for the Middle Market, this segment reported a 7.6 percent revenue growth in the fourth quarter of 2017 over the previous year and represents the third-largest global economy. Data from the Organization for Economic Cooperation and Development shows that manufacturing attracts the most investment dollars by far.
According to the National Center for the Middle Market, this segment reported a 7.6 percent revenue growth in the fourth quarter of 2017 over the previous year and represents the third-largest global economy.
R&I: What are the business risks these companies might face when expanding to the U.S.?
DM: Regulatory compliance is a challenge because there is a mix of federal, state and local law to contend with, and state and local ordinances can vary widely. You have to know your jurisdiction. There may be different tax codes, different financial reporting procedures, differences in employment law, and so forth. Not complying with those requirements can open up any company to massive legal liability exposure.
Duty of care is another commonly overlooked obligation. If a foreign firm is sending employees to the U.S. to get a new business or branch up and running, how will they protect those workers so far from home? There must be procedures and resources in place to provide care if or when it’s needed.
Language barriers amplify those risks. Lack of effective communication or understanding only increases the likelihood that something will be missed. The due diligence aspect of expanding into a new country is quite significant.
And on top of the commercial risks, there’s also insurance risk.
R&I: What are the biggest insurance and risk management risks?
DM: The biggest risk is assuming that a domestic policy will cover you abroad. Coverage may not extend beyond the borders of the issuing country, and even if it does, your jurisdiction in the U.S. may require different limits or broader coverage.
There are different risk transfer mechanisms, and firms have to re-examine what structure or approach will benefit them most and keep while keeping them in compliance.
Differences in contract terminology can also affect how a foreign policy will be interpreted in the U.S. Definitions of admitted versus non-admitted may vary in the U.S. from a European market. Self-insured retentions and deductibles may offer different advantages and disadvantages. There are different risk transfer mechanisms, and firms have to re-examine what structure or approach will benefit them most and keep while keeping them in compliance.
Policy wording can create confusion as well. What’s the difference between “business interruption” and “loss of use”? What is the difference between your equipment “replacement cost” versus “insurable value?” There are many technicalities to work through.
R&I: How should companies prioritize and tackle the due diligence work?
DM: Given that many international firms looking to expand into the U.S. are mid-size companies, addressing both the commercial and insurance risks is a big demand on their limited resources. And what usually happens is that risk management is relegated to the placing of insurance, and it drops down on the priority list. With so many other operational challenges to overcome, the due diligence team wants to get coverage in place and get it done quickly so they can move forward. So they buy a policy and check the “insurance” box.
But this misses a vital opportunity to leverage domestic risk management resources that can help them address both the business and insurance risks they’re facing.
R&I: How can incoming international firms get connected to the right local resources?
DM: U.S.-based insurers should be able to connect their clients with the best local resources. AXA Insurance Company has several domestic partners who can help international companies understand and mitigate their exposures. To protect physical assets, such as properties, equipment and supply chains, we work with AXA Matrix. AXA Matrix is a risk engineering firm that can help companies evaluate the value of their assets and their level of exposure, and suggest ways to mitigate it beyond just buying more coverage.
To protect employees, we partner with AXA Assistance. They provide security alerts and travel tips, and can facilitate medical care for employees abroad by leveraging a global network of fully vetted medical providers. They make fulfilling duty-of-care obligations streamlined and straightforward.
Adopting an ERM framework can help even companies that run lean to anticipate the hazards they might encounter with any given opportunity.
At the end of the day, the carriers that provide the best service for a company’s most important assets will build the long-lasting relationships that support continued growth. We’ve built an on-the-ground support network for companies once they land in the U.S., so they know who to turn to when they have questions.
R&I: What else should inbound companies do from a risk management perspective?
DM: Risk management should be built into any business’s strategic decision-making. Insurance is only one part of that. Adopting an ERM framework can help even companies that run lean to anticipate the hazards they might encounter with any given opportunity. Technology has a role to play here. Platforms that connect and streamline internal functions can facilitate communication and make sure every department has input on strategic decisions. Everyone has a different perspective, and an interdisciplinary approach to decision-making can uncover both potential problems and innovative ways to address them.
R&I: While we know you are focused on helping international companies come to the U.S., what is your favorite international destination to travel to?
DM: I have been fortunate to travel and reside in quite a few countries around the world. I have a soft spot for places like South Africa, Dubai and Istanbul but London is my favorite city. I find London to be the epicenter of global trade and culture. &