Using multinational policies to keep clients ahead of rising liability
As Canadian companies rapidly globalize, clients are seeing value in setting up a multinational policy, says Christine Collins, head of casualty at HDI Canada Branch.
Multinational commercial general liability (CGL) insurance programs work by providing a master policy with uniform coverage across countries, supplemented by local policies for regional compliance. And in Canada’s manufacturing, mining and related industries, where Collins is seeing this appetite grow, global operations mean global liabilities.
“In manufacturing, one thing we have seen is more just-in-time deliveries,” Collins tells Canadian Underwriter. This leads to questions about the true origins of a manufacturing claim.
For example, parts and components may be manufactured offshore. Then they are moved to another location for processing. After that, they may be shifted to a different region for further processing.
“There could be a distribution centre in Europe, which [is responsible for] processing on the item, but it was actually manufactured in North America,” as Collins explains. “So where does the claim [originate]? Where should the claim [be handled]? That can open up liability claims on the multinational side, when there could be a gray area.”
A multinational CGL policy provides a single point of contact for claims management and simplifies communication for the local points of contact.
Local rules and regs
Another reason for increased uptake of these programs is to comply with local regulations, Collins says.
Multinational policies are designed to ensure a company is compliant with the insurance regulations and legal requirements of each country in which it operates.
“A Canadian underwriter may not be fully aware of what the [coverage] requirements are in, say, Botswana,” Collins says. “But because there’s a Botswana policy in place, that common local coverage is included in that.”
Geopolitical disruptions can affect a multinational policy. For this reason, clients must be aware of sanctions or embargoes imposed by other countries. Such events can impact coverage availability, because insurance companies will limit or restrict coverage in those areas.
In a separate example, no insurers can do business in Russia at this time, which means there’s no way to provide coverage under a multinational program.
Likewise, in countries designated as ‘not admitted, not allowed’ (NANA), clients risk incurring fines, penalties, or punitive tax treatment on premiums and loss payments. As such, it’s key for multinational companies to stay informed about adverse economic or political climates in their operational locations.
“Venezuela is a good example [of a country undergoing] very high inflation and the value of the currency really fluctuated,” says Collins. This can affect local placements.
Unintended subsidies
Another thing to note about multinational policies: countries with lower levels of loss may subsidize rates for countries with significant losses.
For example, Canada’s legal climate, which is not unduly litigious, has a favourable reputation. And yet, says Collins, “at times, the rest of the world tends to group Canada and the U.S.A. together. And they’re very different in terms of liability.”
As this space develops, Collins predicts, multinational policies may branch into niche areas of business insurance.
“There are many advantages to an integrated program, and we’ll continue to see more growth in this area in the future,” says Collins
“[Commercial] property and casualty are often the standard core lines, but we could see these kinds of programs evolve even more in niche spaces like environmental, D&O, E&O and cyber.”
This article is excerpted from one appearing in the August-September 2024 print edition of Canadian Underwriter. Feature image courtesy of iStock.com/royyimzy
