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Managing a Global Insurance Program. New Jersey RIMS January 14, 2014 Tracey Estes Regional Underwriting Manager AIG WorldSource Bruce Wineman Sr. Managing Director Aon Risk Solutions. Agenda. Introduction What is the big deal about International? Considerations - 5 key concepts

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managing a global insurance program
Managing a Global Insurance Program

New Jersey RIMS

January 14, 2014

Tracey Estes

Regional Underwriting Manager

AIG WorldSource

Bruce Wineman

Sr. Managing Director

Aon Risk Solutions

  • Introduction
  • What is the big deal about International?
  • Considerations - 5 key concepts
  • Comparing insurance environment in China and United Kingdom
  • What can go wrong?
  • Emerging trends
  • Framework and tools for making decisions
  • Under the best of circumstances, arranging a large insurance program presents a challenge to any Risk Manager, broker or insurer alike. But when the development of a program becomes or is complicated by foreign business customs, financial regulations and language barriers, the matter can become overwhelming.
what s the big deal about international
What’s the Big Deal about International?


  • Economic – EU, NAFTA
  • Currency – Fluctuations/Devaluations
  • Language – 1,652 dialects in India
  • Political – Socialist, Conservative
  • Exposure – Earthquake, Cyclone, Flood
  • Time Differences
what s the big deal about international1
What’s the Big Deal about International?

Not So Obvious

  • Legal Differences – Napoleonic Code, Sharia
  • Regulatory Environment
  • Data Collection
  • Cultural/Distance Issues
  • Attitude to Risk and Safety
  • Social Legislation
  • Taxation
risk spectrum who needs a global program

Limited exposure to loss or liability outside of USA

  • Exports,
  • International Travel,
  • Foreign Suppliers

Assets or operations outside of USA, but not inextricably tied together

Operations usually not heavily interdependent, foreign operations may be material to the balance sheet.

Risk Spectrum – Who needs a Global Program?







International locations, Material to balance sheet,

Operations interdependent

Recognizable name, target for lawsuits, finances transcend borders, larger geographic spread

can t i just use my domestic program
Can’t I Just Use My Domestic Program?

Maybe – but issues arise with:

  • Coverage
  • Compliance
  • Taxation
  • Cost
  • Markets
  • Program Management
key concept number one 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 Environmental and even D&O in certain countries.

Key Concept Number One – Compulsory Insurance
key concept number two admitted insurance
Key Concept Number Two – Admitted Insurance

Policy issued by Insurer licensed or registered in Country A


based in Country A


Policy issued by Insurer NOT licensed or registered in Country A


based in Country A


“In over 85% of countries non-admitted cover is prohibited or restricted”

key concept number three tax treatment of non admitted loss proceeds
Key Concept Number Three – Tax Treatment of Non-Admitted Loss Proceeds

Non-Admitted Loss Proceeds

Parent Entity

International Subsidiary

Capitalization (or Other) Tax plus Frictional Costs

Income Tax

key concept number four excess dic

Master Policy



Policy Limit



Breadth of Cover

Local Admitted Policies

Key Concept Number Four – Excess/DIC
key concept number five financial interest
Key Concept Number Five – Financial Interest
  • Insures the parent’s interest in a subsidiary located in a non-admitted country – local subsidiary is not an Insured
  • Insures the balance sheet of the parent, rather than a local asset/interest
  • Settlement to the parent only, no local servicing
  • Policy wording developed and supported by individual legal opinions

Master Policy

Global Insurer

Parent / Policyholder


international risk considerations
International Risk Considerations

Other Particular International Issues/Considerations:

  • Role of Broker
  • Cash before Cover
  • Taxes:

- Premium

- VAT/Goods & Services

- Fire Brigade

- Catastrophe Pools

  • Tacit Renewal
  • Tariff Rating
  • Premium Allocations
  • Underwriting Data
  • Wording Differences in standard policies
  • Social and Geographic Considerations

- Time Zones

- Hierarchy

- Holidays

- Sense of Urgency

- Acronyms/Terminology

- Reliance on e-mail

  • Managing Expectations

- Clear and concise communications

- Timeline

risk review china
Risk Review - China

Regulatory Constraints

  • Key Compulsory Coverages – WC/EL (State Plan), Motor
  • Non-Admitted Insurance Position – Not permitted
  • Tariff Rating – national premium tariff as set by CIRC applies to compulsory motor third party liability
  • Wording – controlled by CIRC
  • Cash before Cover - Advance premium payment prior to binding risk required under certain policies by province

Market Features

  • Brokers only engaged in <5% of commercial business
    • 60 licensed insurers – 3 largest (PICC, Ping An, China Pacific) have 68% market share
    • Insurer licenses are granted by province – not all companies are licensed nationally
  • Evidence of Insurance: Typically a cover note issued by insurance carrier
risk review china1
Risk Review - China

Cultural Considerations

  • Legal Environment –Claim consciousness low
  • Attitude towards Safety – new concept
  • Attitude towards Loss Control –new concept


  • Premium Tax: Small stamp duty of .1% of premium
  • VAT/Goods & Service Tax: There is no VAT on insurance premiums, though insurers are liable to pay VAT on material damage claims submitted by non-VAT registered policyholders.
risk review united kingdom
Risk Review – United Kingdom

Regulatory Constraints

  • Key Compulsory Coverages – WC (State Plan), Employer’s Liability, Motor
  • Non-Admitted Insurance Position – Permitted, except for Compulsory lines
  • Tariff Rating – Open rating
  • Wording – Open wording
  • Cash before Cover - None

Market Features

  • Brokers engaged in over 80% of commercial business
    • Over 1,000 licensed insurers – 10 largest have less than 50% market share
  • Evidence of Insurance: Typically a “To Whom it May Concern” letter issued by an insurance broker
risk review united kingdom1
Risk Review – United Kingdom

Cultural Considerations

  • Legal Environment –High claims consciousness
  • Attitude towards Safety – well developed concept
  • Attitude towards Loss Control – well developed concept


  • Premium Tax: 6% applicable to all lines
  • VAT/Goods & Service Tax: There is no VAT on insurance premiums, Claims paid to policyholders registered for VAT are settled net of this tax as they are able to reclaim any VAT incurred. Otherwise, claims payments include any VAT involved. The claims cost for identical events can, therefore, vary according to the tax status of the insured.
what can go wrong examples
What can go wrong? Examples
  • Admitted/Non-Admitted Insurance
  • Tax
  • Excess/DIC cover
  • Scope of local coverage
  • Cash Before Coverage
  • Tacit Renewal
emerging issues what s next
Emerging Issues – What’s Next?

New Markets/Opportunities: Brazil, China, India and more

Outsourcing, Off-shoring: Program impact – Contracts, Certificates, Claims

Protectionism: Regulation in Brazil, Argentina, African countries

Alternative Program Structures: fronting, cash flow, captives

Lines of Insurance: D&O, Local Umbrella, Professional Liability, Environmental (‘ELD’), Business Travel Accident and more

emerging issues what s next1
Emerging Issues – What’s Next?

Tax: Increasing audits

Global Insurance Marketplace: New entries into the market create different access points

Carrier Capabilities: Worldview, MyAIG, MIA and more

Role of the network insurance broker: advice & counsel in addition to service & administration

Program Performance: beyond just compliance

  • AIG Multinational Design Tool description/screen shots
program design tool
Program Design Tool
  • Explores the recommended approach for designing a multinational program, considering local regulations, tax, coverage and claims issues.
  • Provides risk managers with a comprehensive and holistic view of the 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:

calling all stakeholders
Calling All Stakeholders

Determining the optimal solution for your risk is complex and involves multiple stakeholders.

  • Legal
  • Tax / Finance
  • Risk Management
  • Logistics
  • Facilities
  • Human Resources
  • Other – depends on organization structure

Open conversation early in the program design/renewal process is key.

practical steps
Practical Steps
  • Get out there!
    • Visiting locations aids your knowledge, credibility and leverage
    • Your travel saves money
  • Different countries, exposures, practices and surprises
    • Country-specific info via Brokers and Insurance Carriers
    • Local operations’ expectations, e.g., deductibles
  • Communicate – teach and sell Risk Management to all
    • Be seen as focused on helping local management with ops & goals; not simply enforcing insurance compliance.
    • Establish local contacts; Avoid assuming all the responsibility
    • Keep management apprised – Local and C-Suite
    • Get on Business Development’s radar
    • Create a Risk Management webpage
    • Remember email’s limitations – keep it simple
practical steps1
Practical Steps
  • Periodically assess your program & players
    • One size doesn’t necessarily fit all
    • Int’l acquisitions – assess before adding to the program
    • Special coverages – e.g., Pure Financial Loss, Extended Products, Political Risk
    • Insurer panels
    • Using global insurer regional offices; broker networks
  • Helpful Risk Management Activities
    • Strategy meetings
    • Risk Forums