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Peeling Back the Layers of Risk for U.S. Companies on the Global Stage

Multinational companies need programs tailored to their unique exposures.
By: | April 9, 2018 • 6 min read

U.S.-based companies of every size have compelling reasons to take their business abroad. This especially holds true as global expansion is no longer exclusive to Fortune 500 corporations.

“The primary driver of international expansion is economic opportunity,” said Jonathon Fanti, Senior Vice President and Underwriting Leader, Public Company Management Liability, QBE North America.

“Though the U.S. economy continues to recover, tapping into the resources, workforces and consumer bases of other nations represents big growth potential for American organizations.”

Technology has been a key driver to increasing international commerce. Companies are able to easily communicate and conduct transactions from thousands of miles away.

“The internet has made it easier for U.S. companies of all sizes to sell their products and services overseas than it was 20 years ago. It allows for 24/7 communication,” said Harpreet Mann, Vice President, QBE North America.

But going international doesn’t always mean building factories or brick-and-mortar offices abroad. It could also mean selling a product overseas without having any physical location there, sourcing supplies from foreign firms, or it could mean international executive travel.

Different layers of global involvement bring increased multinational risks, requiring global expertise and protection.

Travel Risk

With increasing frequency, regardless of company size, employees often travel outside the U.S. to seek business in a new market; research potential suppliers; or scout possible locations for a new facility, shop or office. For these companies, the primary level of overseas exposure involves international travel.

Standard travel insurance typically covers cancellations and delays, lost baggage, medical expenses, evacuations and a 24/7 assistance hotline. Such coverage may not be enough to mitigate an employer’s risk.

“Employers have a duty to care for the health and well-being of employees, especially when they are halfway around the globe,” said Richard Friesenhahn, Head of Multinational, QBE North America.

However, “a domestic workers’ compensation policy may not cover incidents that happen abroad,” Friesenhahn said. “Consequently, it is imperative companies have a global policy that will take care of employees no matter where they are.”

The most diligent employers will partner with insurers to provide pretravel risk assessments in various regions worldwide and develop plans to reduce potential risks. They also offer real-time security updates for specific regions, and trustworthy local medical providers to help workers who become ill or injured.

Working with a company that provides expertise is key, as the extension of coverage outside the U.S. for domestic workers’ compensation varies by state and may not cover accidents that happen abroad. In addition, employers may need multiple coverages to cover all the risks a traveler could be exposed to.

Risks to Companies’ Receivables

As companies increasingly sell their goods overseas, they are often required to extend credit to their buyers to remain competitive and make the sale. By extending credit, the company selling its products overseas is assuming risks that could result in nonpayment by the buyer. It is crucial such companies protect one of their most valuable assets — their receivables — which involves understanding the risks that may trigger non-payment.

By allowing a buyer to pay in the future for goods delivered, the company selling the goods is assuming credit risk. Specifically, such a company is exposing itself to the possibility that the buyer’s financial condition may deteriorate and impact its ability to pay. If a buyer does not make payment, the company supplying the goods will certainly incur a financial loss.

Another risk arises from the increasing trend toward companies selling to fewer and fewer entities. As a result, companies’ sales are concentrated in a few large buyers. The failure, therefore, of one buyer to pay can significantly impair the financial condition of the company supplying goods.

Companies may be exposed to political risks, as well as concentration risks, when selling goods outside the United States. A recent report by the Department of Commerce noted that Mexico, Canada, China, Japan and the UK were the top five markets for SME’s exporting overseas.

It is important for companies to understand how geopolitical risks may impact a buyer’s ability to make payment.

With the recent political discourse around exiting or renegotiating, international trade agreements may further increase political risks for companies selling overseas. The increased political risk could be in the form of sanctions, embargoes, license cancellations or other retaliatory measures taken if international relations sour. Such changes could block a company’s access to profitable markets and disrupt supply chains.

Brick-and-Mortar Risk

One of the most critical risks faced by a company is the threat to their physical locations outside the United States, whether it is a production facility, warehouse, office or retail distributor.

A traditional global master policy encompassing property/casualty, workers’ comp and auto liabilities may not provide enough coverage or even be considered legal in some countries. Some jurisdictions require that foreign companies purchase local policies from a locally-licensed admitted carrier.

“When you get down to it, the countries want the tax,” Fanti said. “Requiring local policies by law is about supporting their local economy.”

Such requirements vary by coverage and country. Local property, casualty, auto and workers’ comp policies are usually compulsory, but others like management and professional liability coverage may not be required by local regulators. Failure to get local coverage can result in steep fines and prevent claims from getting paid.

“Non-licensed, non-admitted carriers are not legally allowed to send funds into some regions where local policies are required by law,” Fanti said. “If your master policy isn’t recognized, you need to find an insurance carrier who will legally be able to pay your claim.”

Global Expertise

QBE North America, an integrated specialist insurer, recently expanded its multinational offering with QBE Global Connect, a foreign casualty package comprised of General Liability, Excess Auto and Foreign Voluntary Compensation coverages, joining its existing multinational Directors’ and Officers’ liability insurance offering. The company’s Global Credit & Surety business also offers solutions for multinational companies worldwide.

“QBE is offering an integrated multinational solution in the marketplace by connecting a strong management liability solution with our property and casualty expertise and multinational coverage. As a multinational insurer with offices and expertise around the globe, we are uniquely positioned in the market to satisfy the growing need for multinational expertise and coverage,” Friesenhahn said.

QBE’s Multinational Client Centers help domestic clients identify global risks and implement a comprehensive program tailored to their specific needs.

“The centers address regulatory, compliance and tax needs while coordinating communications throughout our global network,” Fanti said. That network consists of 36 offices worldwide and a service team dedicated to ensuring product of local policies around the globe.

“QBE is truly global with on-the-ground teams who understand the local risks and local coverages. They can provide the network with up-to-date insights on regulatory changes, and the network is in constant communication with our brokers and underwriters,” Fanti said.

The QBE P&C and D&O multinational coverage solutions, QBE’s Multinational Client Centers and the integration of 36 QBE offices and partners around the world make QBE a leading insurer in the multinational space.

To learn more, visit QBE’s newly launched website at www.qbena.com.

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




QBE North America is a division of QBE Insurance Group Limited, one of the world's 20 largest insurance and reinsurance companies. We offer the unique integration of financial strength, a broad product set and sophisticated capabilities to deliver value for our partners and policyholders.

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.

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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.”

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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.

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“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]