In recent years, businesses and organizations have faced a slate of new and growing risks. While the worst of the COVID-19 pandemic appears to be behind us, businesses are confronting the persistent challenges of inflation, political and economic instability, workforce shortages, an increase in severe weather events, and other perils.
But even in difficult times, businesses continue to look beyond their borders to drive growth. While expanding internationally creates new opportunities, it also comes with additional risks. When evaluating your insurance program’s multinational coverage, it’s important to consider not only policy options, but also the depth of global expertise and service that an insurer provides.
Four special risks impacting global companies
When you first venture across borders, you’ll need to expand the scope of your current insurance coverage. Your business likely already has policies in place that protect against a range of risks — notably property and casualty (P&C) losses — but domestic policies generally have geographic limits. You’ll need to put new policies in place that provide protections for your business and employees wherever you do business.
But simply expanding the geographic range of your current insurance program will not address special risks that can emerge in the global marketplace. Newly global companies as well as established multinational companies with robust insurance programs should be aware of these four risk areas:
Sanctions compliance Geopolitical conflicts and instability have led to complex and frequently changing sanctions rules prohibiting companies from doing business in certain jurisdictions and with certain individuals. These rules have been adopted by countries in Europe, Asia, North America, and Latin America — and are applicable to many nations worldwide. For example, as of March 2023, more than two dozen jurisdictions and regions are subject to U.S. economic sanctions1.
Violating sanctions — even inadvertently — can result in substantial fines and criminal penalties, as well as reputational damage. Multinational businesses must engage with appropriate professional advisors to help them navigate the complexities of operating in multiple jurisdictions where multiple sets of laws and regulations may apply.
Local insurance regulations Every nation — and sometimes jurisdictions within nations — has its own insurance regulations. There is a growing international trend toward protectionism in insurance, with restrictions on insuring risks in jurisdictions where an insurer is not licensed and how claims are paid.
If the insurance you have purchased domestically does not comply with local insurance requirements, your risk management program may not provide appropriate coverage for your exposures and could present additional financial and tax consequences. A multinational carrier with deep local knowledge can help ensure that you place an insurance program that complies with applicable insurance requirements across multiple jurisdictions.
M&A risks Mergers and acquisitions (M&A) carry a number of risks, such as tax, fiduciary, intellectual property, and environmental liabilities. These risks can become more complex when companies involved in the transaction operate in different nations. For example, a transaction could result in unexpected tax consequences in a nation where the seller but not the buyer operates.
In advance of closing any M&A transaction, your insurance due diligence should include a review of liabilities and coverages that encompass every jurisdiction where the two companies involved operate. An experienced, knowledgeable agent or broker can help identify coverage gaps that need to be closed.
Personal peril Kidnapping, ransom, and extortion represent a serious threat to international businesses and their employees. An estimated 15,0002 kidnappings occur annually, with pay-outs reaching approximately $500 million3. This risk could increase in the face of a faltering global economy and political instability.
A strong multinational insurer can often provide a range of services that accompany coverage against these types of risk. Your global insurer may provide risk engineering guidance to help you identify local threats, strengthen your security practices, and recover from covered incidents.
The value of putting a Controlled Master Program in place
Your business or organization will be in the best position to holistically manage global risks by establishing a Controlled Master Program (CMP) that includes a master policy issued in your home country and local policies in other jurisdictions where you operate. This arrangement allows the master policy to overlay local policies, with Difference in Conditions (DIC) and Difference in Limits (DIL) clauses enabling the master policy to respond to a claim when a local policy’s limits are exhausted or its terms are not applicable.
Whether you’re considering your first foray into the international marketplace or already operate in other nations, you can benefit from an in-depth discussion with an agent or broker with experience in helping companies manage a global insurance program. An insurance professional can help you consider coverage options and evaluate carriers for the extent of their global reach, expertise, and services.
This document is advisory in nature and is offered as a resource to be used together with your professional insurance advisors in maintaining a loss prevention program. It is an overview only, and is not intended as a substitute for consultation with your insurance broker, or for legal, engineering or other professional advice.
Chubb is the marketing name used to refer to subsidiaries of Chubb Limited providing insurance and related services. For a list of these subsidiaries, please visit our website at
www.chubb.com. Insurance provided by ACE American Insurance Company and its U.S. based Chubb underwriting company affiliates. All products may not be available in all states. This communication contains product summaries only. Coverage is subject to the language of the policies as actually issued. Surplus lines insurance sold only through licensed surplus lines producers. Chubb, 202 Hall's Mill Road, Whitehouse Station, NJ 08889-1600.
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