Today’s global business environment presents major opportunities as well as increasingly complex exposures. Companies are facing challenges around risk and insurance that can change at a dizzying pace.
A few key trends are driving the need for comprehensive and appropriate international protection:
- Continuing globalization of business. U.S. businesses, from the Fortune 500 to the middle market space, continue to expand globally. More than half of the middle market companies surveyed for JPMorgan Chase’s “2018 Business Leaders Outlook” are active in the global marketplace and 71 percent anticipated that overseas sales would increase in the next five years.1 For many, they’re entering uncharted territories.
- Trade amid a volatile geopolitical climate. Trade has been and continues to be an important part of the global economy. U.S. exports of goods and services totaled $2.2 trillion in 2016, and imported goods totaled $2.7 trillion2. Successful companies have to adapt to a turbulent geopolitical landscape that can alter even the best-planned strategy.
“Last year we were answering questions about the implications of Brexit,” notes William J. Porter, Head of International Sales and Distribution for Zurich North America. “Today, we are asked what the tariffs are going to mean. Will they increase or decrease our customers’ shipments overseas? This has a direct impact on marine and property programs, and can have a follow-on effect on lines from casualty to specialty products. It’s important to track where customers are doing business and where they are sending their goods. A part of our job as a global insurance provider is monitoring and helping customers understand their exposure valuations, which can change based on more or fewer shipments, shifting supplier strategies, or even moving operations to a different country.”
- Interconnectivity of risk. The shift toward global supply chains and just-in-time inventory has lowered corporate costs and inefficiency, but it has also reduced the buffer between calamitous events and corporate boardrooms, notes Iwan Stalder, Head of Global Cat Management for Zurich.3 Using extreme weather as an example, he referred to the 2011 Japanese tsunami that shuttered an automobile factory 6,000 miles away in Louisiana. A lack of awareness of global supply-chain vulnerabilities can result in a high price tag for business leaders. In fact, 69 percent of companies lack full visibility on supply chains, despite 65 percent having experienced at least one disruption, according to the Business Continuity Institute’s 2017 “Supply Chain Resilience Report.”4
The need for international coverage that will protect a company’s global interests, whether it’s doing business in one foreign country or 100, seems obvious, yet it often remains misunderstood or even overlooked.
A frequent misconception is thinking a domestic policy will cover a business’ exposures in a foreign country.
“It’s very possible that the program that’s in place is not right for that customer, or it might not even be in place at all,” Porter said. “They might have a carrier tell them they don’t need a policy in that country, that their U.S. policy will protect them. They don’t understand what the repercussions of that could be. The territorial coverage granted on a domestic policy is typically limited to the United States and its territories and possessions. Anything outside of that is not going to be covered.”
Another error some brokers and customers make, he added, is that even when they are aware of new exposures — say a firm opens a new office in a different country — they don’t realize it has to be dealt with immediately. But waiting until a policy renewal to address such changes can be disastrous.
“They’re setting themselves up for potential problems if they don’t have the coverage in place in countries where they legally or contractually have to for certain lines,” Porter said, “or if there’s a loss and they discover it can’t be paid the way they think it is going to be paid.”
Furthermore, different countries have different penalties for transgressions.
“You can be fined, you can lose your license to do business in the country. There are some countries that could levy criminal charges for insurance infractions,” Porter explained.
Finding global solutions
Businesses navigating this complicated landscape will benefit by working with an insurance provider who has deep experience and knowledge of local jurisdictions around the world and can provide greater assurance that their insurance program will align with local laws.
“At Zurich, International Programs is more than just a product, it’s a platform,” Porter said. “We write International Programs for so many different lines of business — Property, Marine and Casualty, of course, but also International Crime, Directors and Officers and Environmental, to name three additional examples. A lot of brokers just don’t realize the breadth of International coverages that are available today. Helping their multinational clients proactively address coverage gaps can reduce exposure to risks they may not even be aware of.”
When a customer needs to change course swiftly in response to global events, Zurich can offer a variety of flexible, tailored solutions.
“We have products and services in more than 210 countries and territories and the capacity to monitor any changes in insurance regulations,” Porter said. “We’ve got the flexibility to make sure the coverage that’s needed is provided. That’s where the breadth of our network really comes into play. Whatever happens, we have knowledgeable people around the world where exposures exist. They will work with us to help make sure that a customer’s coverage is going to be what it needs to be to protect their company.”