Global risks, local challenges
Multinationals turn to XL Insurance for help with insurance and compliance
By Elisabeth Boone, CPCU
As any agent can attest whose client list includes firms with multistate operations, navigating the complex web of various states’ legal and regulatory requirements presents daunting challenges for both agents and business owners.
Factor in language, cultural, political, economic, and social differences and you get some idea of the hurdles that confront firms that do business outside the United States. For multinationals from modest to massive, obtaining expert guidance on compliance and communication is equally as important as insurance in structuring a comprehensive program of risk management.
No one knows this better than XL Insurance, which is the global brand for member insurers of the XL Capital group of companies. With a worldwide network that allows it to serve clients in more than 100 countries, XL Insurance works with multinational entities of all sizes to guide them through the maze of issues involved in providing coverage across different countries while ensuring compliance with local laws and regulations.
A leader in this endeavor is Anthony Cabot, a 25-year veteran of the insurance industry who in January of this year was appointed director of global programs for XL Insurance. Based in Zurich, Cabot retains his responsibilities as product development manager for continental Europe and Asia. XL Insurance currently participates in some 1,400 global programs for multinational clients in such diverse industries as finance, insurance, and real estate; retail and wholesale trade; mining and manufacturing; agriculture, forestry, and fishing; construction; transport and telecommunications; energy and sanitation; and hospitality.
The Global Programs Unit is focused on the Fortune 5000, Cabot says, “But we do approach other levels of the market as well. While we have minimum premium requirements, we work with brokers who have multinational clients in what we consider the upper middle market segment: companies with revenue of $50 million and up. A global program has a master policy in the client’s home country plus a policy in at least one other country, so we will propose and offer a program to any company that meets that qualification, depending on the line of business.”
Although XL Insurance works with multinational clients from all over the world, Cabot says, “Our programs with companies based in Europe are the larger part of our portfolio of global programs.” He adds, however, “We do have many programs in the U.S.”
Asked to describe his responsibilities as director of global programs, Cabot says, “I provide oversight for the coordination of our global programs. It’s a fairly complex affair when you’re talking about a large number of countries, but basically our job is to make sure that the underwriting and administration of each program follows the guidelines we’ve established. This oversight allows our network of underwriters and customer relationship managers to have a single point of reference if they have questions about fronting partner relationships, specific client concerns, or systems issues, or if they have ideas for how we might do things better,” Cabot says.
Building a program
Creating and delivering a comprehensive program for a multinational client is a multi-step process that is carefully orchestrated by specialists within XL Insurance.
“The initial contact comes from our business development manager or customer relationship manager who is closest to the client’s corporate office. Upon receiving a submission, we analyze it to understand what the client requires and to make sure we can meet those needs,” Cabot explains. As between U.S.-based multinationals and those based in other countries, he observes, there’s little difference in the exposures they face when doing business across borders.
In underwriting and structuring a global program, Cabot says, “We need to know the countries in which the client is located and the specific issues for that client in each country. We also need to understand the client’s structure: Is it centralized or decentralized? What is the client’s philosophy and management style? How is its risk management department structured?”
Next, Cabot continues, “We take the client and broker through the process and explain where a local policy is required to comply with local regulations, and where other options are available to cover the local risk. We also show the broker and client how the master policy in the client’s home country will be structured, which provides some umbrella-like coverage for the local policies where allowed.”
For some multinational clients, Cabot says, “It may be appropriate to arrange what’s known as ‘permissible unlicensed cover’ instead of a local policy. For example, if a U.S. client has major manufacturing operations in just a few countries, typically we will obtain local policies so that we can issue certificates of insurance or provide proof of insurance where required by contract. For large corporations that have operations in, say, 100 countries, we’ll arrange a combination of locally issued policies, permissible unlicensed cover, and financial interest coverage, which covers the financial interest of the company in its uninsured local operation.”
For clients and brokers that require a compliant insurance solution for their worldwide operations, XL Insurance has introduced two new products: XL WorldPath (called XL WorldPass outside of North America) and XL EuroPass.
“XL WorldPath guides our clients toward full legal, regulatory, and tax compliance wherever in the world they are doing business and have insurance provided via XL Insurance,” Cabot explains. The product is available to clients in more than 100 countries.
“XL EuroPass is designed for clients that have operations in countries of the European Union,” Cabot continues. “Under the Second Non-Life Directive, which was issued in 1992, once you’ve established yourself in one of the EU countries, you’re allowed to do business across all borders within the EU without having to obtain additional licenses,” he says.
“You just have to make sure you’re paying the taxes in all the countries where you have operations, but you can do this from a central point in Europe,” he explains. “The XL EuroPass solution helps our clients ‘passport’ their insurance coverages throughout the European Union.
“We make relevant information available to our clients and their brokers based on the research and analysis we conduct regarding legal, regulatory, and tax compliance,” Cabot says. “We’re confident about our ability to answer clients’ and brokers’ questions regarding these issues.
“We believe that this partnership and communication among the client, the broker, and the insurance company is key to the success of the global insurance program,” Cabot says. “At XL Insurance, we see it as our responsibility to keep our partners informed of any changes in legal, regulatory, or tax requirements that would affect the client. Everything we do,” he explains, “is designed to optimize each client’s insurance program and also to meet the client’s expectations with regard to delivery of that program.”
Whatever its size, the nature of its business, or its operating territory, virtually no multinational enterprise has escaped some fallout from the global economic crisis. We asked Cabot to comment on how the crisis is affecting global program clients.
“With declines in sales volume and revenue as well as headcount reductions, we’re seeing some reductions in total sums insured,” Cabot says. “That affects how a client looks at its global insurance program. The beauty of our approach is that we can use our network to improve the efficiency of delivering our global programs.”
Although multinational clients are understandably concerned about reducing exposures and costs, Cabot says, “We haven’t noticed that any of our clients are sacrificing their insurance program because of the economy. They may take a bigger deductible or a slight reduction in limits, but overall they continue to need insurance programs during this down cycle.
“The expectations are that we will come out of this recession sooner rather than later, so we see our clients being very careful not to compromise the stability of their insurance program. After all, insurance is what allows multinationals to take more risk during periods like this,” Cabot asserts.
For more information:
XL Insurance Global Programs
Web site: www.xlinsurance.com