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Are You Global-Ready? Most Companies Underestimate Multinational Risks

Learn the questions you need to ask to obtain the right coverage.
By: | December 14, 2017 • 5 min read

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 local regulations.”

Alfred Bergbauer, head of Multinational Insurance

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 proper insurance?

“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.

  1. Passport

These are companies that send representatives abroad to meet with potential clients, partners, suppliers or buyers, or to attend training seminars or conferences.

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,” Bergbauer said.

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.

  1. Exporters

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.

  1. 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 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 mid-size companies.

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:

  1. Do you have or send employees overseas?
  2. Do you sell products overseas?
  3. Do you have goods warehoused or equipment located overseas?
  4. Do you have international locations?
  5. 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 www.thehartford.com/multinational.

1 The Hartford’s Second Quarter 2017 Pulse Survey



This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with The Hartford. The editorial staff of Risk & Insurance had no role in its preparation.

The Hartford is a leader in property and casualty insurance, group benefits and mutual funds. With more than 200 years of expertise, The Hartford is widely recognized for its service excellence, sustainability practices, trust and integrity.

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]