Avoiding the Panic: How to Plan for Multinational Losses

Having multinational exposure is almost inevitable for Fortune 500 and small- to middle market companies alike. The need for international executive travel and the expanse of global supply chains brings risk to all organizations.

 

Also universal is the lack of preparedness. Events appearing “straightforward” in the U.S. take on a new level of complexity when regulations, language, time zones and geographical distance are factored in.

 

“Our research suggests that more than 40% of mid- and large commercial enterprises in the U.S. have never had specific conversations around multinational exposures with their brokers and insurers¹,” said Alfred Bergbauer, head of multinational insurance, The Hartford.

 

As a result, “there is a panic moment when companies are unprepared for the complexity of multinational losses, especially when it involves employee safety.”

 

These four loss scenarios demonstrate how complex multinational risks can be, and why it’s imperative for companies to work with insurers that have the expertise to manage them:

 

If an employee is injured during employment in the U.S., workers’ compensation would 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, the protocol is not as simple.

 

“A piece of the injury claim could be covered from accident insurance. A piece of it could be covered through workers’ compensation insurance. A piece of it could even be paid through health insurance. As a result, it’s important to understand how these coverages work together when a loss occurs overseas,” Bergbauer said.

 

“More importantly, how will care and transport be coordinated? Bear in mind, the injured employee may not speak the local language and is likely unfamiliar with their surroundings. If medical evacuation is called for, what provider will be called to action and what is the process for notifying them? Who will quarterback all of these communications and ensure action is taken?”

 

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 getting to the kidnapped employee and bringing them home.

 

“Is there a crisis management plan in place? Is there a third-party vendor that is going to join the team? These are the critical factors that lead to a successful outcome.”

 

In a kidnap and ransom scenario, there is also the possibility the employee can be injured, highlighting the importance of coordinating services and coverage. Whether a kidnap & ransom, business travel accident or workers’ compensation policy is triggered affects the vendors that will be called into action and how those 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,” Bergbauer said. “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.”

 

Whether product liability coverage applies under domestic or foreign policy depends on where the product was manufactured and sold, where the injury took place, and where the suit is filed. So, a U.S. manufacturer selling 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, factoring in local regulations, legal precedent and 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. 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.

 

“The coverage should always address a company’s specific risks, but 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.”

 

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.

 

In a multinational operation, business locations are interconnected and rely on each other: If a factory producing sub-component parts in the Philippines is destroyed by fire, then the factory in Germany relying on those parts can’t furnish the finished product. The retailer in the UK doesn’t get its product, threatening future revenue or contractual obligations and the bottom line of the parent company.

 

A single physical loss in one country can very quickly cause BI and economic loss in three or four countries down the supply chain. But the property policy on that Philippines factory may not pick up those claims. Suddenly that single, straightforward loss is triggering separate policies in multiple countries.

 

“If a business has multiple carriers, the potential for an outcome that leads to incomplete compensation becomes really high. If a business has a coordinated global insurance program with the expertise to manage losses impacting the supply chain, the potential for covering the loss is greater,” Bergbauer said.

 

To work through the panic of a loss and lift the fog of confusion, multinational organizations need a consultative relationship with an insurer that doesn’t just write policies but that takes time to understand a client’s operations and exposures.

 

The Hartford’s team of underwriters and claims professionals works across lines and alongside domestic teams to collaborate with insureds and brokers on coverage.

 

“We built a multinational capability within The Hartford that it is fully embedded within the fabric of our operations,” Bergbauer said. “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.”

 

The Hartford’s multinational group also provides its Global Insurer Network, which offers coverage options for a policyholder to build a program tailored to meet their needs. Through partnerships with 89 individual insurance groups around the world, The Hartford can issue local admitted policies in more than 220 countries, ensuring all regulatory requirements are met.

 

These partnerships also ensure lines of communication are kept open, so that The Hartford’s U.S.-based claims professionals can work with local teams to coordinate services, provide the needed financing and gather information to relay to clients.

 

“There is only a small community of insurers that have the expertise 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,” Bergbauer said.

 

To learn more, visit thehartford.com/global-insurance.