Global Insurance Requirements John Barnwell Bruce Eberly Bruce Wineman May 7, 2010.
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Transcript of Global Insurance Requirements John Barnwell Bruce Eberly Bruce Wineman May 7, 2010.
Global Insurance Requirements
John BarnwellJohn Barnwell
Bruce EberlyBruce Eberly
Bruce WinemanBruce Wineman
May 7, 2010May 7, 2010
2
Discussion TopicsDiscussion Topics
Overview from a Cargo Perspective– John Barnwell, Allianz Global Corporate & Specialty
Theoretical and Practical Considerations– Bruce Eberly and Bruce Wineman, Aon Global
3
“Globalization is not something we can hold off
or turn off…it is the economic equivalent of a
force of nature – like wind or water.”Bill Clinton
Ah, Globalization Ah, Globalization
4
Topics to CoverTopics to Cover
Growth in Sector Complex Environment Implications of Non-Compliance Possible Solutions
5
Growth in SectorGrowth in Sector
Source: IUMI 2009 Cargo Fact Sheet
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Growth in SectorGrowth in Sector
Global exposures of clients are changingGlobal exposures of clients are changing
Worldwide shift of investments across the globe (growth / emerging markets)
Global M&A activities across trade sectorsFocus on efficient and lean production processes and
service capabilities
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Growth in Sector/Complex EnvironmentGrowth in Sector/Complex Environment
“Wide Angle View Seen As Key For Global Programs” (3/29/2010)
“Global Strategy Stabilized IBM During Downturn.”
(4/20/2010)
“Ignoring Local Insurance Regulations Could Scupper Global Expansion”
(3/9/2010)
“Non Admitted: The Hidden Dangers”
“Canada, Not the 51st State: Insuring Canadian Exposures”
“Effective Global Risk Programs: The Impossible Dream?”
(Session topics)
8
Complex EnvironmentComplex Environment
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Complex EnvironmentComplex Environment
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Complex EnvironmentComplex Environment
Increased regulationIncreased regulation
Multinational legal and fiscal Multinational legal and fiscal environmentsenvironments
Trade restrictionsTrade restrictions
- UN SanctionsUN Sanctions
- OFACOFAC
Trade is global – but regulations are local
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Complex EnvironmentComplex Environment
Admitted Coverage Required?
Country Imports/Exports Storage
Brazil
Russia
India
China
Argentina
Mexico
Canada
Admitted*
Non-admitted
Admitted*
Non-admitted*
Admitted
Admitted
Admitted
Inland Transit
Admitted
Admitted
Admitted
Non-admitted*
Admitted
Non-admitted*
Admitted
Admitted
Admitted
Admitted
AdmittedAdmitted *
Admitted*
Admitted*
* Dependent on certain conditions & terms of sale* Dependent on certain conditions & terms of sale
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Implications of Non-ComplianceImplications of Non-Compliance
Fines and penalties
Unanticipated tax charges
Jail
Reputational risk
Trade disruption
Suspension of insurer‘s license
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Possible SolutionsPossible Solutions
Centralized Approach Establish centrally controlled / coordinated
Risk Management philosophy Establish centrally controlled / coordinated
Master Program with local admitted cover Pool local policies via reinsurance Integrate Captive if required
Decentralized Approach
Obtain standalone insurance coverage locally
Buy separate DIC/DIL cover at central level, where allowed
Employ local decision-making
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SummarySummary
International trade will continue to grow
Trade is global – regulations are local
Complex global regulations require a team approach
Each client is unique and requires customized solutions
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Discussion TopicsDiscussion Topics
Overview from a Cargo Perspective– John Barnwell, Allianz Global Corporate & Specialty
Theoretical and Practical Considerations– Bruce Eberly and Bruce Wineman, Aon Global
16
Why is this Important Now?Why is this Important Now?
Corporate governance Increased awareness by regulatory
authorities Tax issuesProgram administrationReputational riskContract/Vendor requirements
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Compliance ConcernsCompliance Concerns
Regulatory: Laws are not objective – particularly for
global firms Solutions may be expensive Penalties
Tax: Responsibility Process for payment under global program
structures Materiality
Logistical: Cost Resources Administration, including allocations
How can companies identify and manage their level of compliance risk?
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Compliance SpectrumCompliance Spectrum
FULL ADHERENCE
Wish to provide global coverage, addressing all countries with operations
METHODOLOGY
Address countries based upon selected criteria – # of employees, size/nature
of operation (i.e., non-sales offices), number of
Ds&Os, etc.
ARBITRARY / “SQUEAKY WHEEL”
Address countries which complain loudest
MINIMALIST
Investigate concept/cost,
Do nothing
COST
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Designing your Global ProgramDesigning your Global Program
FULL ADHERENCE
Wish to provide global coverage, addressing all countries with operations
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Compliance FrameworkCompliance Framework
Country
Non-admitted permitted
Compulsory coverage
Local placement
No
Yes
Calculate IPT
Pay to carrier or fiscal rep.
Evaluate:• Business importance• Corporate objectives/structure• Contractual obligations• Indemnification provisions/restrictions• Availability of cover/limits in local market• Regulatory approval process• Penalties/consequences• Allocation philosophy• Tax position• Retention levels• Local service needs• Costs involved and/or other factors
Score countriesRed
YellowOptions Green
Second priority Leave aloneObtain regulatory
approval
Local policy
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Multiple StakeholdersMultiple Stakeholders
Insurer Broker Insured:
– Risk Management
– Senior Management
– Tax
– Legal
– Finance
– Business Development
– Purchasing
– Field
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Program OptimizationProgram Optimization
Program factors in requirements governing compulsory, admitted
& non-admitted coverage, contractual and tax
requirements.
A comprehensive communications plan to ensure all parties have
necessary information and contacts support both business and risk
management objectives.
Program design based on review of operations, cross-border business
issues and processes. Critical issues such as contractual obligations, interdependencies, contingent exposures, operational needs
addressed.
Program options include efficiency in design, costs, and
administration.
Selection of markets based on leverage, coverage, cost and
capabilities regardless of underwriting location.
AddressAddressExposuresExposures
ComplianceCompliance
ProgramProgramStructureStructureMarket Market
SelectionSelection
Efficiency &Efficiency &ExecutionExecution Global Risk
ManagementProgram
Program structures tailored to minimize coverage overlap while ensuring program response and compliance where available and
commercially feasible.
Address Corp.Objectives
The optimal program incorporates the firms’ risk finance and management objectives into its structure and implementation.
CommunicationsCommunications
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Available ToolsAvailable Tools
AXCOLloyd’s CrystalAdvisenInsurance Services
Network: – www.isn-inc.com
AIMU– www.aimu.org
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AXCO – Summary Market ReportsAXCO – Summary Market Reports
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Lloyd’s - CrystalLloyd’s - Crystal
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Compliance Case Study - BrazilCompliance Case Study - Brazil
Situation - Brazil: Global Tech firm with assembly operations in Brazil
- Parts imported, assembled & the finished product exported.
Brazilian cargo premium exceeds entire global cargo program premium- Firm needs to reduce costs
Possible Solutions: 1. Cover Brazil under Global Cargo Program
2. Set up admitted underlier to Global Cargo Program
3. Pretend to Self-Insure but really cover under Global Program…after all, Import Insurance is no longer compulsory
4. Export Insurance isn’t compulsory so self-insure
Result: “We’re screwed…but at least we know why”
27
SummarySummary
Theoretical, but becoming more realistic
Each company will have different risk tolerance
Pragmatic process for identifying and managing Compliance risk
Solutions will continue to develop
28
These presentations are intended for educational purposes only and do not replace independent professional judgment. Statements of fact and opinions expressed are those of the participants individually and, unless expressly stated to the contrary, are not the opinions or
positions of Allianz or Aon Global, their respective affiliates, or subsidiaries. Allianz and Aon Global do not endorse or approve, and assume no responsibility for, the content, accuracy or completeness of the information presented. Attendees should note that sessions may be
published in various media, including print, audio and video formats without further notice.
DisclaimerDisclaimer