Growing international businesses face a more diverse risk exposure, adding to the complexity of insurance purchase, says Graham Condie of Allianz
No one can deny that the world of international business is constantly evolving. Business is increasingly drawn towards new markets and the emergence of the BRIC (Brazil, Russia, India, China) bloc creates not only access to important emerging economies but also brings advantages in terms of expertise, production cost and speed of delivery to a company’s global customer base. As the world becomes smaller, the footprint of many companies is becoming larger – from a risk management perspective, this in turn can bring added complexity.
Today’s risk manager will be faced with critical challenges as their company grows into new markets, from core cultural integration through the introduction of new subsidiaries to group risk management philosophies, broader risk assessment and monitoring to successful streamlining of new systems processes and procedures. Moreover, a growing business will necessarily entail a more diverse risk exposure, which in turn will affect key insurance buying decisions.
There is no standardised model for global insurance procurement. Much depends upon the extent of a company’s global footprint, their level of risk appetite, how issues of local retention and deductibles are approached and what level of central decision making should be applied. If a company has some form of captive involvement this also needs to be taken into consideration, particularly given governance and capital requirements engendered by the much debated Solvency II regulations.
For companies already benefiting from a global insurance programme, the challenge is how best to integrate new subsidiaries, which is not necessarily straightforward if historically insurance decision making has been the domain of local management. Over time, most companies may be able to convince a new subsidiary of the benefits derived from being part of the programme “family”, however integration is a gradual process and no two subsidiaries are necessarily the same. The Risk Manager’s role is influenced by the demands and needs of the business and this is where the partnership with a global insurer becomes critical.
Given the frequently changing global dynamic, insurers are increasingly expected to possess a range of global programme services which are truly “fit for purpose”. Clients need insurer partners who they can trust not merely in terms of security and capacity but also from the perspective of value added programme input. As a fundamental an insurer must know their client and be entirely in tune with their changing needs – this can only be achieved through open dialogue with client and broker, which is far more likely to lead to an effective programme structure.
An enduring client / insurer relationship will in the future be built on the foundation of three key insurer commitments. First, an insurer will need to display pro-active, on the ground knowledge of legal and cultural issues across the globe in order to provide a client with a level of understanding that would otherwise take them time and effort to accrue. Secondly the insurer will need to demonstrate a different level of underwriting transparency, such that a client can appreciate the key underwriting drivers and their impact on premium. Through building an expert knowledge of a client an insurer can also relieve the information burden so frequently cited as a negative by many Risk Managers.
Thirdly, clients will expect to receive regular and accurate programme information on all aspects of delivery, from policy issuance and premium payment to details of claims status and specialist risk management services. It is therefore imperative that a fully integrated service proposition is in place, backed by a network of dedicated resource across all key disciplines and an enhanced on-line functionality.
Such commitments are easy to speak of yet harder to deliver, and insurers will undoubtedly be measured on their range of capabilities.
For the relational buyer a global programme represents an opportunity to truly develop the type of insurance solutions which complement and properly protect a growing asset portfolio. By striving for transparency, communication, service and flexibility, the client, broker and insurer can provide the cornerstones of an enduring insurance relationship.
Graeme Condie, is IIS Coordinator and New Markets & Projects Manager at Allianz Global Corporate & Specialty