Having multinational exposure is inevitable for companies of all sizes, including Fortune 500 and small to middle market businesses. The need for international executive travel and the expanse of global supply chains brings risks to all organizations.
Events that might appear straightforward in the U.S. take on a new level of complexity when certain factors are considered:
- Regulations
- Idioma
- Time zones
- Geographical distance
These four loss scenarios demonstrate how complex multinational risks can be and why it’s imperative for companies to work with the proper resources that can provide experienced guidance to navigate through them.
1. Employee Injury
If an employee is injured during employment in the U.S., workers’ compensation insurance would help cover their care and treatment. The network of providers and process for managing a claim is already established. If the employee is injured while abroad, however, the protocol is not as simple.
“A portion of the injury claim could be covered from an accident insurance. A piece of it could be covered through workers’ compensation insurance. A piece of it could even be paid through health insurance,” says Alfred Bergbauer, head of multinational, captives and TPA services & programs at The Hartford. “As a result, it’s important to understand how these coverages work together when a loss occurs overseas.”
In addition, the injured employee will have to navigate unfamiliar surroundings, coordinate transport, and may face a language barrier.
2. Kidnap and Ransom
What is the response if a key executive is kidnapped and held for ransom in a foreign country? This situation would be high stress anywhere, but when it happens abroad, there is the added challenge of locating the kidnapped employee and bringing them home.
“Along with having a safety plan in place, particularly when operating in higher hazard areas, it’s also critical to partner with an experienced response provider. Time matters in these situations and having a partner who operates as an extension of your team is essential to give you the best chance of having a successful outcome,” says Kevin Nolan, head of multinational at The Hartford.
In a kidnap and ransom scenario, there is also the possibility the employee can be injured – highlighting the importance of coordinating services and coverages. Whether a kidnap and ransom, business travel accident or workers’ compensation policy is triggered affects the vendors that will be called into action and how these actions will be financed.
“There are potential balance sheet implications with this type of event, and companies may have to contend with uncomfortable surprises like taxes or extra fees they could be responsible for,” says Bergbauer. “It’s critical for companies to understand how their multinational insurance program is structured, what policies will be triggered, and how they’ll pay when the worst happens.”
3. Product Liability
Whether product liability coverage applies under domestic or foreign policy depends on where the:
- Product was manufactured and sold
- Injury took place
- Suit is filed
A manufacturer in the U.S. that sells products in multiple countries must consider the legal landscape of each country when estimating the potential impact of a product liability loss.
This exposure becomes a complex equation when factoring in:
- Local regulations
- Legal precedent
- Policy language
It’s a complex task that brokers and carriers sometimes fail to discuss in detail with their multinational clients.
“It is important to talk about where products are sold and the nature of the risk associated with the products,” says Bergbauer. “Teasing this out and doing a scenario plan focusing on how each policy will respond helps inform structuring an insurance program that meets the risk finance strategy. Rarely do brokers and clients pull in the carrier to have a conversation around how this policy is to interact with other products in the context of a multinational program.”
4. Property Loss
Property loss seems to be the most straightforward type of loss. But when the loss occurs in a foreign location, the ripple effects are more profound.
“One thing that is sometimes overlooked when an insured has separate U.S. and foreign property programs is accounting for an independent business income exposure when they own or operate a foreign location which makes goods that the U.S. operation depends on to generate revenue,” Nolan says. “Going through the actual cash flows and making sure that specific, appropriate interdependent BI limits are scheduled on the right policy are both necessary steps to have a program function in a way where you can be made whole after a loss.”
A single physical loss in one country can very quickly cause business interruption and economic loss in three or four countries down the supply chain.
“As supply chains have become more complex, understanding the intricacies of how an insured’s business operates is imperative to structuring a program that is fit for purpose. This takes coordination between the insured, their broker, and the carrier,” says Nolan.
What To Look For in a Multinational Insurer?
To work through the panic of a loss and lift the fog of confusion, multinational organizations need a consultative relationship with an insurer who can write policies and take time to understand the client’s operations and exposures. A true multinational insurer should be able to:
- Coordinate services
- Provide the needed financing
- Gather information to relay to clients
“We built a multinational capability within The Hartford that it is fully embedded within the fabric of our operations,” Bergbauer says. “When one of our producers or domestic underwriters spots a multinational exposure, we can be engaged to consult with those customers and dive into their risk profile. There is only a small community of insurers that have the experience and products to provide policyholders with the ability to effectively build their multinational program, and we are one of the few with the capability to pull this all together.”
Learn more about The Hartford’s multinational insurance.
1 2017 survey conducted by Hartford U.S.-based insureds with annual sales or revenues of $10 million to $1 billion.
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Not all coverages are offered in all jurisdictions and no coverage may be provided in some jurisdictions where restricted by law. All policies should be read carefully to identify all exclusions, limitations, and other terms and conditions. In the event of a conflict between any policy and this document, the terms and conditions of the policy shall control.
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