Coverage Spotlight: Multinational

A Controlled Master Program is Vital for U.S. Firms Expanding Overseas

In this Q&A, a multinational risk expert discusses key exposures many mid-sized U.S. companies overlook when structuring multinational coverage.
By: | April 5, 2018 • 5 min read

An increasing number of mid-sized U.S. companies are seizing international business opportunities, but many of them are not prepared for international business risks. As foreign regulators tighten the reins, U.S. entities must be mindful of the significant implications associated with local regulatory compliance. In this Q&A, The Hartford’s Vice President and Head of Multinational Underwriting, Alfred Bergbauer, discusses the risks and opportunities for the middle market.


R&I: What trends are you seeing in the U.S. for the middle market?

Alfred Bergbauer: Our pulse survey from the second quarter of 2017 shows that more U.S. mid-sized companies are pursuing international activities in one form or another. It runs the gamut from executive travel to opening manufacturing facilities overseas. We anticipate that these companies will only continue to increase their international activities going forward. The opportunity and, in fact, the need to expand internationally is greater than ever. Technology and globalization continue to make our world smaller, requiring companies to tap into new markets or lose risk losing out to existing and new competitors.

R&I: From a risk perspective, what do mid-sized companies need to be aware of when expanding internationally?

AB: Mid-sized companies have much to consider as they expand overseas, however, the most significant challenge involves understanding how risk needs can and should be addressed to ensure proper coverage and local regulatory compliance.

Our research suggests that 86 percent of companies with international exposures believe they have specific international insurance, but only 56 percent actually have such coverage, and only 25 percent have local policies where locally insurable exposures exist.

Technology and globalization continue to make our world smaller, requiring companies to tap into new markets or lose risk losing out to existing and new competitors.

Most mid-sized companies address their international exposure via endorsements on U.S.-based general liability policies, but these can result in significant coverage gaps and may not properly address local regulatory requirements. Inappropriately structured coverage can expose clients, brokers and carriers to potentially significant coverage gaps, fines and tax implications. As regulatory scrutiny continues to increase, and as regulatory bodies share information, it is increasingly important that mid-sized companies with international exposures operate in full compliance with local laws. Compliance is most easily achieved via the issuance of locally admitted insurance policies (policies issued by locally licensed and/or registered carriers). As such, it is important to work with insurers that understand local regulatory requirements, can coordinate locally admitted/compliant coverage solutions and customize global solutions with the client’s best interest in mind.

R&I: Aren’t global master policies meant to bridge those gaps?

AB: Coverage provided by master policies is generally not considered admitted outside of the country in which the master policy is issued. While master policies provide coverage consistency, coverage under the master should generally not be relied upon to address local country risk needs. As such, master policies should be paired with coordinated, locally issued insurance policies.
To help ensure consistent and compliant coverage, The Hartford offers customized controlled master program solutions, combining the breadth and flexibility of a master policy with coordinated, locally compliant program policies.

R&I: What is a controlled master program (CMP)?

AB: It’s a coordinated insurance program to help U.S. businesses manage and insure their risks around the globe, without having to work with local carriers directly. Our CMP consists of The Hartford’s Master Policy as the foundation, with coordinated local admitted policies issued where our clients have locally insurable exposures (generally, permanent local employees, locally registered legal entities or representatives and/or local operations).

We leverage our global network infrastructure to identify where local policies are required and then place good local standard policies in compliance with local regulations. The Hartford has local capabilities via its global carrier network partners in more than 150 countries.

Eighty-six percent of companies with international exposures believe they have specific international insurance, but only 56 percent actually have such coverage, and only 25 percent have local policies where locally insurable exposures exist.

R&I: What is “good local standard?”

AB: It refers to what would be considered competitive terms and conditions and pricing that local insurers would normally offer to local clients. In other words, we don’t just want to place any coverage, we want to provide customary, competitive local coverage which both meets the needs of clients and adheres to local regulatory requirements.

R&I: What coverages come standard in a CMP?

AB: The Hartford provides fully customizable solutions based on our clients’ unique risk exposures and needs. Generally, programs include several core covers, such as property, commercial general liability, contingent commercial auto liability, voluntary workers’ compensation, business travel accident, and kidnap, ransom and extortion. We also write equipment breakdown, transit, ocean cargo, and professional liability, among others.


R&I: What’s the benefit of having everything rolled into one program?

AB: Having all multinational coverages executed and overseen by one carrier streamlines the experience for insureds and helps ensure coverage and service consistency. They have one point of contact for questions or concerns. Underwriting, claims services and risk control services are all aligned and coordinated. Whether your risk is domestic or international, you’re going to get a consistent response and level of service.

R&I: Are there any other benefits that come with a CMP?

AB: Risk control and travel assistance services are generally included with The Hartford’s standard multinational offering for mid-sized U.S. companies. Our clients with employees abroad have 24/7 access to emergency medical and evacuation services, lost document assistance, embassy referrals, access to local attorneys, and other security services. Our risk engineering capabilities are also available to CMP insureds around the globe.

Financial strength and established reputation are also important factors. Taking on multinational risks is a big step, and businesses need an experienced carrier to help handle the complexity. The Hartford has A ratings from A.M. Best, Moody’s and S&P, and we’ve been serving clients for more than 200 years. &

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

High Net Worth

High Net Worth Clients Live in CAT Zones. Here’s What Their Resiliency Plan Should Include

Having a resiliency plan and practicing it can make all the difference in a disaster.
By: | September 14, 2018 • 7 min read

Packed with state-of-the-art electronics, priceless collections and high-end furnishings, and situated in scenic, often remote locations, the dwellings of high net worth individuals and families pose particular challenges when it comes to disaster resiliency. But help is on the way.


Armed with loss data, innovative new programs, technological advances, and a growing army of niche service-providers aimed at addressing an astonishingly diverse set of risks, insurers are increasingly determined to not just insure against their high net worth clients’ losses, but to prevent them.

Insurers have long been proactive in risk mitigation, but increasingly, after the recent surge in wildfire and storm losses, insureds are now, too.

“Before, insurance was considered the only step in risk management. Now, our client families realize it is one of the many imperative steps in an effective risk management strategy,” said Laura Sherman, founding partner at Baldwin Krystyn Sherman Partners.

And especially in the high net worth space, preventing that loss is vastly preferable to a payout, for insurers and insureds alike.

“If insurers can preserve even one house that’s 10 or 20 or 40 million dollars … whatever they have spent in a year is money well spent. Plus they’ve saved this important asset for the client,” said Bruce Gendelman, chairman and founder Bruce Gendelman Insurance Services.

High Net Worth Vulnerabilities

Laura Sherman, founding partner, Baldwin Krystyn Sherman Partners

As the number and size of luxury homes built in vulnerable areas has increased, so has the frequency and magnitude of extreme weather events, including hurricanes, harsh cold and winter storms, and wildfires.

“There is a growing desire to inhabit this riskier terrain,” said Jason Metzger, SVP Risk Management, PURE group of insurance companies. “In the western states alone, a little over a million homes are highly vulnerable to wildfires because of their proximity to forests that are fuller of fuel than they have been in years past.”

Such homes are often filled with expensive artwork and collections, from fine wine to rare books to couture to automobiles, each presenting unique challenges. The homes themselves present other vulnerabilities.

“Larger, more sophisticated homes are bristling with more technology than ever,” said Stephen Poux, SVP and head of Risk Management Services and Loss Prevention for AIG’s Private Client Group.

“A lightning strike can trash every electronic in the home.”

Niche Service Providers

A variety of niche service providers are stepping forward to help.

Secure facilities provide hurricane-proof, wildfire-proof off-site storage for artwork, antiques, and all manner of collectibles for seasonal or rotating storage, as well as ahead of impending disasters.

Other companies help manage such collections — a substantial challenge anytime, but especially during a crisis.

“Knowing where it is, is a huge part of mitigating the risk,” said Eric Kahan, founder of Collector Systems, a cloud-based collection management company that allows collectors to monitor their collections during loans to museums, transit between homes, or evacuation to secure storage.

“Before, insurance was considered the only step in risk management. Now, our client families realize it is one of the many imperative steps in an effective risk management strategy.” — Laura Sherman, founding partner, Baldwin Krystyn Sherman Partners

Insurers also employ specialists in-house. AIG employs four art curators who advise clients on how to protect and preserve their art collections.

Perhaps the best known and most striking example of this kind of direct insurer involvement are the fire teams insurers retain or employ to monitor fires and even spray retardant or water on threatened properties.

High-Level Service for High Net Worth

All high net worth carriers have programs that leverage expertise, loss data, and relationships with vendors to help clients avoid and recover from losses, employing the highest levels of customer service to accomplish this as unobtrusively as possible.

“What allows you to do your job best is when you develop that relationship with a client, where it’s the same people that are interacting with them on every front for their risk management,” said Steve Bitterman, chief risk services officer for Vault Insurance.

Site visits are an essential first step, allowing insurers to assess risks, make recommendations to reduce them, and establish plans in the event of a disaster.

“When you’re in a catastrophic situation, it’s high stress, time is of the essence, and people forget things,” said Sherman. “Having a written plan in place is paramount to success.”


Another important component is knowing who will execute that plan in homes that are often unoccupied.

Domestic staff may lack the knowledge or authority to protect the homeowner’s assets, and during a disaster may be distracted dealing with threats to their own homes and families. Adequate planning includes ensuring that whoever is responsible has the training and authority to execute the plan.

Evaluating New Technology

Insurers use technologies like GPS and satellite imagery to determine which homes are directly threatened by storms or wildfires. They also assess and vet technologies that can be implemented by homeowners, from impact glass to alarm and monitoring systems, to more obscure but potentially more important options.

AIG’s Poux recommends two types of vents that mitigate important, and unexpected risks.

“There’s a fantastic technology called Smart Vent, which allows water to flow in and out of the foundation,” Poux said. “… The weight of water outside a foundation can push a foundation wall in. If you equalize that water inside and out at the same level, you negate that.”

Another wildfire risk — embers getting sucked into the attic — is, according to Poux, “typically the greatest cause of the destruction of homes.” But, he said, “Special ember-resisting venting, like Brandguard Vents, can remove that exposure altogether.”

Building Smart

Many disaster resiliency technologies can be applied at any time, but often the cost is fractional if implemented during initial construction. AIG’s Smart Build is a free program for new or remodeled homes that evolved out of AIG’s construction insurance programs.

Previously available only to homes valued at $5 million and up, Smart Build recently expanded to include homes of $1 million and up. Roughly 100 homes are enrolled, with an average value of $13 million.

“In the high net worth space, sometimes it takes longer potentially to recover, simply because there are limited contractors available to do specialty work.” — Curt Goetsch, head of underwriting, Private Client Group, Ironshore

“We know what goes wrong in high net worth homes,” said Poux, citing AIG’s decades of loss data.

“We’re incenting our client and by proxy their builder, their architects and their broker, to give us a seat at the design table. … That enables us to help tweak the architectural plans in ways that are very easy to do with a pencil, as opposed to after a home is built.”

Poux cites a remote ranch property in Texas.

Curt Goetsch, head of underwriting, Private Client Group, Ironshore

“The client was rebuilding a home but also installing new roads and grading and driveways. … The property was very far from the fire department and there wasn’t any available water on the property.”

Poux’s team was able to recommend underground water storage tanks, something that would have been prohibitively expensive after construction.

“But if the ground is open and you’ve got heavy equipment, it’s a relatively minor additional expense.”

Homes that graduate from the Smart Build program may be eligible for preferred pricing due to their added resilience, Poux said.

Recovery from Loss

A major component of disaster resiliency is still recovery from loss, and preparation is key to the prompt service expected by homeowners paying six- or seven-figure premiums.

Before Irma, PURE sent contact information for pre-assigned claim adjusters to insureds in the storm’s direct path.

“In the high net worth space, sometimes it takes longer potentially to recover, simply because there are limited contractors available to do specialty work,” said Curt Goetsch, head of underwriting for Ironshore’s Private Client Group.


“If you’ve got custom construction or imported materials in your house, you’re not going to go down the street and just find somebody that can do that kind of work, or has those materials in stock.”

In the wake of disaster, even basic services can be scarce.

“Our claims and risk management departments have to work together in advance of the storm,” said Bitterman, “to have contractors and restoration companies and tarp and board services that are going to respond to our company’s clients, that will commit resources to us.”

And while local agents’ connections can be invaluable, Goetsch sees insurers taking more of that responsibility from the agent, to at least get the claim started.

“When there is a disaster, the agency’s staff may have to deal with personal losses,” Goetsch said. &

Jon McGoran is a novelist and magazine editor based outside of Philadelphia. He can be reached at [email protected]