Multinational Programs: Building a Multinational Insurance Program: When, Why and How David Valzania Head of AIG Multinational Americas 1.617.330.4419 david.valzania@aig.com www.aig.com/multinational WWW.CHICAGOLANDRISKFORUM.ORG
The Multinational Opportunity, and Need 2
What Is a Multinational Company? An entity of any size that has assets and/or exposure outside of its home country. 3
AIG Multinational Of the 174,000 multinationals in the universe, AIG has a relationship with 27,500 multinational clients and writes Controlled Master Programs (CMPs) on 5,700 of them. Source: D&B global commercial database; AIG Market Research & Analytics 4
When Do I Need Local Policies? Stage 1 Stage 2 Stage 3 Activity Business Travel Exports/Imports Stage 1 Activities Sales Offices Warehousing Stage 2 Activities Full Blown Local Operations Local Creation of Product or Service Overseas Exposures Business Travel Exports or Imports Stage 1 Exposures Sales Offices Warehousing/Distribution Stage 2 Exposures Local Companies Real & Personal Property Local Hires Vehicles Risk Meter People Liability Assets Need for Local Policies Lower Need Greater Need 5
Risk Concerns Greatest concerns to global risk managers: 1. Damage to brand or reputation 2. Economic slowdown 3. Regulatory or legislative change 4. Increasing competition 5. Failure to attract or retain top talent 6. Failure to innovate 7. Business interruption Source: Aon 2015 Global Risk Management Survey 6
Loss, or Catastrophe? 7
Why a Multinational Program? The seven C s to consider 1. Control a single program covering all subsidiaries, all locations 2. Compliance regulatory and tax 3. Coordination critical for efficiency in execution, particularly post-loss 4. Cost a coordinated program often more cost-effective 5. Consistency uniform terms, conditions and service, everywhere 6. Certainty one complete program with DIC/DIL assurance 7. Claims an insurer that performs when, where, and how you need 8
Client-Centric Approach to a Complex Discipline AIG Multinational s role is to work in partnership with product underwriters and the broker to better execute and service multinational business. 9
The Lifecycle of a Multinational Account Whether it s traditional Risk Transfer, Controlled Master or Fronted Programs, the initial creation and renewal cycle hinges on service and coordination with the client and broker. Define Solutions Evaluate Country Requirements Coordinate with Underwriting NEW PROGRAM Quote, Bind and Communicate Pre-Renewal Meetings RENEWAL Identify Issues and Solutions Commit to Perform Gather Local Data Identify Needs Service and Stewardship Service and Stewardship 10
AIG Multinational Philosophy and Decision Wheel Understanding local regulation is extremely important but should not be the only factor you consider when designing a program. Continue to follow basic risk management principles; even though the exposures are foreign, the principles for addressing them remain the same. If the decision is not to purchase a local policy, all stakeholders should be well versed on the potential pitfalls and limitations. 11
Evolve, As You Grow There are three types of policy options a multinational company can purchase to insure its exposure in a given country. 12
Multinational Program Alternatives Stand-Alone Local Policies policies issued in every country where the client has risks or exposures. Each local policy is issued by a carrier licensed in the particular country. Global Policy A policy issued in the client s home country covering not only the homecountry entity (the parent ) but also its risks and exposures in other countries. Freedom of Services (FOS) policy: an FOS policy is an alternative way to insure risks in the European Economic Area (EEA) member states. Controlled Master Program (CMP) A CMP is created when one insurer issues a global policy to the client and local policies to the client s local business units in other countries. Any could be fully-insured or fronted to involve a client captive to share and allocate risk to meet corporate risk management objectives. 13
Multinational Considerations Key capabilities of an effective multinational carrier Risk appetite Local operations in key countries (owned preferred in key countries) Admitted and non-admitted policy options Fronting capability Local technical claims expertise 14
Coordinate Delivery Across All Lines 15
Compliant? Example: India Example: Mexico The Indian tax authority fined an Indian subsidiary for claim payments received under its German parent company's global policy. The Authority argued that the claim payment to the parent was to evade local taxes and assessed the corresponding taxes on the Indian subsidiary. The insurance regulator stated (and reiterated) that purchasing foreign insurance from within Mexico is a violation of insurance law and criminal offense. A specific case does not exist at this time. Example: Argentina Example: Switzerland An individual insured was fined 8 times premium and the insurance broker 15 times premium for illegally transacting life insurance business with a non-authorized foreign life insurer. Swiss authorities voided a professional indemnity policy purchased by a Swiss broker from a foreign non-admitted insurer. The broker was subsequently not admitted into their federal register, therefore, prohibiting it from practicing in Switzerland. 16
The Ultimate Test The ultimate test of any insurance program is that claims are paid. Therefore, the ultimate compliance requirement of a multinational insurance program is not that the insurance company is compliant, or that the insured has achieved compliance. The ultimate test of the insurance policy [or program] is that no difficulties are encountered when claims are made and settled. These difficulties can arise from incorrect or illegal purchasing of insurance, failure to comply with tax laws or regulatory requirements. Source: Compliance of Multinational Insurance Programs Guide, 2015 AIRMIC 17
International Is Our Middle Name 1961 A&H division established Multinational is at our Core 95 years of operating experience 2013 1979 AIG obtains Passport 19531973 for AIG Expertise forms on 1994 JV the operations 1990 Our global network 2013 1939 Croatia UK office AIG enters opens with Sweden ground in the spans over 200 eastern 1946 European countries Enters where Russia we countries 1951 insurers New hold AIU licenses in offices Hungary, 1919 in China 1977 AIU establishes Japan Poland and 2001 its Germany Romania Started in China 1949 AIG establishes Middle 1997 Tata Eastern a and AIG form 1925 AIU opens 1948 in Brazil JV operation in Egypt AIG launches in a Lebanon JV in India Global expansion microinsurance 1962 1957 continues by operations entering in Uganda 2005 South Africa opens 1966 Company HQ relocates from China to New York 1980 Pollution liability program is introduced France, Mexico and Singapore A presence of over 25 years in 70% of AIG AIG opens obtains the 6 th countries branch China s where in first foreign insurance we have licenses New branches open in Hong Kong, Vietnam AIU opens and Philippines in Australia AIG receives a general The company insurance begins license writing in Vietnam D&O
Disclosure AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. For additional information, please visit our website at www.aig.com. All products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Products or services may not be available in all countries, and coverage is subject to actual policy language. Non-insurance products and services may be provided by independent third parties. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds, and insureds are therefore not protected by such funds. Insurance coverage is account specific and is governed by actual policy language. This presentation does not constitute an offer to sell any of the insurance coverage or other products or services described herein. We do not provide legal, credit, tax, accounting or other professional advice, and you and your advisors should perform your own independent review with respect to such matters as they relate to your particular circumstances and reach your own independent conclusions regarding the benefits and risks of any proposed transaction or business relationship. American International Group, Inc. All rights reserved. American International Group, Inc. (AIG) is a leading global insurance organization serving customers in more than 100 countries and jurisdictions. AIG companies serve commercial, institutional, and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange. Additional information about AIG can be found at www.aig.com YouTube: www.youtube.com/aig Twitter: @AIGinsurance LinkedIn: www.linkedin.com/company/aig 19