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International Programs – Beyond the Hype. Bruce Wineman Sr. Managing Director Aon Global Client Network Audrey Rudberg Insurance Manager Cargill Inc. Richard Friesenhahn Executive Vice President Head of Specialty Casualty, US and Canada AIG Property Casualty Mike Reeves - PowerPoint PPT Presentation
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International Programs – Beyond the Hype
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• Bruce Wineman Sr. Managing DirectorAon Global Client Network
• Audrey RudbergInsurance Manager Cargill Inc.
• Richard FriesenhahnExecutive Vice President Head of Specialty Casualty, US and Canada AIG Property Casualty
• Mike ReevesExecutive Vice President – Global MarketsCrawford & Co.
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What to Expect
After attending this session you should be able to better understand:
• Factors that impact international insurance program performance from Fiscal, Statutory and Operational perspectives
• Potential impact of poorly designed risk finance programs
• Best Practices to employ in designing, implementing and managing international insurance programs
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Agenda Introduction
Program Performance – the Other Half
7 Dimensions of a Successful International Program
What Can Go Wrong?
Best Practices
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Constraints• Market – Product Availability• Cost Considerations• Market Evolution• Customs / Practice / Knowledge• Change
• Legal• Finance• Tax• Compliance• Human Resources
• Operational
• Response
• Indemnity
Fiscal Tax
Payment
Statutory Admitted Non-Admitted Compulsory
Program Performance – the Other Half
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7 Dimensions of Successful Program Design
• Based on cross-border business flows and processes
• Address critical issues - contractual obligations, interdependence and contingent exposures
• Comprehensive, including coverage as required, available and appropriate to address exposure across multiple lines/policies
• Options factor in contractual obligations, regulatory requirements, permissibility of admitted /non-admitted insurance, compulsory coverage, and tax.
• Balance corporate objectives, risk characteristics and appetite, compliance, market offerings insurer relationships and available solutions.
• Information on risk-related events: Local policy/exposure data, events, changes in industry, business environment, regulatory, legislative and other
• Designed for efficiency in program cost, execution and administration
• Mirrors company’s underlying operating structure
• Tailored to minimize coverage overlaps/ensure program responsiveness and compliance where possible,
• Clarity on response of multiple policies
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What Can Go Wrong?
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WAREHOUSE FIRE IN FRANCE
• Non-Admitted not permissible in France
• No Local Policy issued
• First Party Damages in excess of $50M – PD & BI
Issue: Program Structure
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Compulsory Insurance Compulsory Insurance = Those lines of insurance that
are required by law for companies operating in a particular territory – typically Automobile Third Party Liability, Work Injury and some forms of Professional Liability. Trend towards compulsory requirements for other lines, such as Environmental and D&O, in certain countries.
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Admitted Insurance
Risk based in
Country A
Policy issued by Insurer licensed or registered in Country A
Risk based in
Country A
Policy issued by Insurer NOT licensed or registered in Country A
= Admitted
= Non-Admitted
“In over 85% of countries non-admitted cover is prohibited or restricted”
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Claims Payments & Tax Considerations
Foreign Subsidiary
("FS") Capitalization
(If P only insures Financial Interest)
ParentEntity("P")
Income or Other Tax?
Non-AdmittedLoss
Proceeds
Income Tax?
Loss proceeds (collected by P on
behalf of FS)
Frictional Cost
Foreign Subsidiary
(“FS")
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Program Design Tool• Explores recommended approach for
multinational program, considering local regulations, tax, coverage and claims issues.
• Provides risk managers with comprehensive/holistic view of variables impacting their decision to insure their companies’ risk exposures locally or globally.
• Illustrates how particular exposures, business strategies and risk sensitivities impact a multinational’s program structure.
Available at: www.aig.com/multinational/pdt
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Sample Country Review Workbook
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WAREHOUSE FIRE IN FRANCE
• Non-Admitted not permissible in France
• Local policy issued under Primary Liability program with limits at US$1M
• Third Party Property damages over US$6M
Issue: Coverage
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WAREHOUSE FIRE IN FRANCE
• Operation had expanded rapidly.
• Error is calculating exposure based on incorrect exchange rate.
• Values reported at US$9M actually over $90M
Issue: Communications
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INSURANCE PREMIUM TAX
• Global company technically headquartered in Switzerland for tax purposes, but majority of operations in the US.
• Liability policy issued by global insurer at direction of US Risk Management with Master policy issued in Switzerland and local policy issued in US.
• Premiums paid by Swiss management company.
Issue: Compliance
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Tax Audits
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FLOOD IN THAILAND
• Sub-Contractor Location
• Multiple sources of components
• Significant Damages
Issue: Address Exposures
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Transfer Pricing
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• Sub-Contractor Location
• Multiple sources of components
• Significant Damages
FLOOD IN THAILAND
Issue: Efficiency
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Developing the Right Solution• Listening to the client requirements
• Building the right solution/process jointly
• Supporting brand and business strategy
• Custom systems structure, data and MI
• Delivering expert project management and implementation
• Building relationships and working to the same objectives
• Focus on program controlso Financialo Qualityo Datao Processo Feedback
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Response – implementation (1)
Global crisis team agreed
Project plan developed
Business critical tasks prioritised
Operational resource both local and from
other countries to cover language, culture,
licences, visas, immunisation, travel,
accommodation, incident control centre
First notice of loss/ intake – scripts:
phone, dedicated email, web portal
Claims management and reimbursement
processes
Treasury management – bank accounts, currency, who &
where
Legal, data privacy and integration of local Government
requirements
Activate global web claims system Data capture criteria
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Response – implementation (2)
Implement 24/7 online access.
Risk management information system –
MI report design, distribution &
frequency
Systems initiated with defined triggers
in place
Resource ‘Ramp Up’ to accommodate
surge volume
Training programme implemented
Supply chain utilisation with access
to approved and accredited contractors
Transparent client communication
channels throughout
Designated CAT personnel with ability
to mobilise as required
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Risk Management Best PracticesAssessmentKnow the company’s footprint and operationsSeek knowledge partners and service providers with a comparable footprint (Brokers/Insures/Claim Adjusters/Loss Control)Data collection: what, who and how
EvaluationEstablish a Risk Financing/program strategy with respect to international operationsUtilize consistent methodology for determining where local policies advisableDetermine local service requirements (Broker, policy issuance, invoicing, Engineering/Loss Control, claim adjustment)Document decisions
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Risk Management Best PracticesImplementation
Communicate Objectives and Program Structure Local service expectations/deliverablesRoles/Responsibilities, including local decision rightsProcesses/procedures for invoices, policy receipt/acceptance, document retention, claims reporting
MonitorChanges in country rules or non-insurance situations with potential impact Service deliverables, regularlyOutcomes and issues with key stakeholders
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Broker Best PracticesAssessmentRisk Management objectivesCommunications process/protocolsCompliance Framework and threshold for materialityClaims Scenarios
EvaluationRegulatory constraintsProgram structure optionsMarket capabilitiesOpportunities for consolidation/improvement across linesChallengesService scope and modelDocument decisions
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Broker Best PracticesImplementation/Monitoring
Marketing plan for Global and Local linesAccount Service Plan with milestonesRisk Management Manual and other documentation available to all stakeholdersOpen Items/Stewardship Reports
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Insurer Engagement Best PracticesCommunicateRisk financing strategyProgram structure objectives including local policy coverage and service requirements Exposure InformationEvaluate program structure options and identify potential constraintsTimeline and monitoring for implementation
Off- Cycle MeetingsImplementation postmortemUpcoming changes in exposures /operationsExchange of knowledge of specific country changesReview of loss trends and mitigation activitySpecific claim updates
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Insurer Engagement Best Practices
Roles/ResponsibilitiesIn-countryClaimsPoints of escalation
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Claims/TPA Best Practices Crisis team agreed in advance.
Roles/responsibilities/processes/escalations etc. agreed
Understanding of potential regulatory and compliance requirements
Pre event planning with partners around ‘common events’ in specific geography. Dry runs to identify potential process problems
‘One off’ non major events – clear protocols subject to geography/event specific requirements pre agreed with partners. Empowered management available to commit globally
‘ One off’ major events – assigned and empowered to sign off commitments and timelines subject to needs around incident type
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Claims/TPA Best Practices
Protocols signed off , secured and kept current ready for activation. Core team all trained/aware of global assignment/commitments and ability to deploy
Agreeing core protocols around incident types with partners – within first 60 days
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Toward Program Performance11 Establish Clear Risk Finance / Structure Objectives with KPI to measure
success
22 Utilize Pragmatic Process to Establish Options to Meet Objectives and Document Decisions
33 Ensure Strong Formalized Communication with Overseas Local Business Units Relative to Risk Management
44 Ensure Linkage With Internal Stakeholders Including both–Management–Operational
55 Clearly Document Program Intent– including roles, responsibilities and financial considerations
66 Monitor & Measure Performance
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Questions, Final Comments and Contact Information
• Bruce Wineman/Aon Global Client NetworkTelephone: 212 441 1633e-mail: [email protected]
• Audrey Rudberg/Cargill Inc.Telephone: 952 742 7296e-mail: [email protected]
• Richard Friesenhahn/AIGTelephone: (212) 458 3593e-mail: [email protected]
• Mike Reeves/Crawford & Co.Telephone: +44 (0) 207 265 4096 e-mail: [email protected]
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