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Insurance Coverage Critical as More Companies Go Global

By Frank Sheridan, head of international at The Hanover

By Frank Sheridan, head of international at The Hanover

As more companies expand their operations globally, well-designed insurance coverage with the help of experienced independent agents plays an increasingly important role in the success of such ventures. In a world that is more interconnected than ever, businesses are seeking ways to seize opportunities in new markets.  The expertise of independent agents is needed more than ever and is a valuable resource for such ventures, particularly in the life sciences, technology and manufacturing industries. Millions of companies operate worldwide, and global business dynamics are constantly evolving. In a recent survey, 49% of U.S. companies identified their best growth opportunities outside their home region, a significant increase from 35% in 2020. As this landscape evolves, insurance becomes a critical imperative for success.

Navigating the complexities of international insurance can be challenging due to ever-changing regulations, shifting supply chains, and diverse insurance requirements across countries. Independent insurance agents are relied upon to understand the nuances of global insurance solutions, especially as more than 85% of U.S.-based companies engage in global business activities. Partnering with carriers that offer specialized solutions tailored to their customer's needs is crucial for independent agents in meeting the demands of their clients.

Trends Impacting Insurance Design

Today's changing businesses and consumer landscapes are forcing businesses to evolve in real time which also impacts their risks. Business owners and independent agents need to be aware of the trends to ensure they are properly mitigating their risk exposure.

For over four decades, China was the epicenter of the world's supply chain. However, disruptions during the COVID-19 pandemic led to a reevaluation of supply chain strategies. Companies began to seek alternate production facilities to shorten supply chains and mitigate delays. This shift continued after the pandemic, and as businesses enter new countries to conduct business, new insurance requirements often follow. This requires a thorough understanding of each country's insurance requirements to ensure customers have proper coverage as their international risks expand.

In addition to the supply chain challenges of working with other countries, there are also regulations that must be followed. Regulations evolve at varying speeds across different countries.  For instance, in Singapore, a 9% goods and services tax on insurance premiums adds to the overall cost—a tax that has increased year over year. Additionally, anti-money laundering requirements in countries like Mexico can lead to delays in coverage issuance. Understanding and complying with local regulatory nuances are crucial to crafting effective international insurance solutions for customers.

Beyond regulations, there is the complexity of non-admitted policies as not all countries accept these policies for international insurance coverage. Providing a master policy in the U.S. may not comply with local laws elsewhere. In places where non-admitted policies are accepted, there are often compliance guidelines that must be followed, such as the policy needing to be written in the local language or being subject to premium taxes. When assessing foreign risk, it's important to have a full understanding of the differing policy requirements by country to ensure proper coverage.

Partnering for Success

Agents can help ensure businesses have the necessary international insurance solutions through customer conversations. Agents have an opportunity to ask key questions about the nature of the business to help determine if international risks extend beyond incidental risk. Overlooking these considerations may expose businesses to pay fines, and penalties out of pocket Furthermore, it can lead to errors and omissions (E&O) risks for agents if there are gaps in coverage.

It is incumbent for agents to stay abreast of their client's international coverage needs.  Following are several key questions to ask that can help assess international risk:

  • Is the company a foreign-owned entity?
  • Do they have leased space requiring local coverage by contract?
  • Are international sales over $2 million?
  • Does the company have employees overseas?
  • Does the company have foreign-owned property?

Once agents have identified exposures, it's important to partner with insurance carriers with in-house expertise in the evolving international market and a dedicated global team. They also should choose a company that provides scalable solutions capable of growing and expanding to meet customer needs. These will be critical partnership components agents will need to leverage to best serve their customers.

In an era of global expansion, navigating the complexities of international insurance requires strategic partnerships and a forward-thinking approach. By understanding the trends shaping the international business landscape, businesses can safeguard their operations and ensure comprehensive coverage tailored to their evolving needs.

Learn more about Hanover GlobalReach which was developed to help protect multinational clients from the inherent risks of foreign exposures by clicking here.