Small to midsize companies are more likely to experience losses from doing business outside the United States or Canada than larger companies, according to an insurance company survey.
The findings were contained in an online 2008 Multinational Risk Survey of chief executive, operating and financial officers and risk managers at 212 U.S. companies conducted by Chubb. The Warren, N.J.-based insurer reported the results at the Risk and Insurance Management Society annual conference here.
"What we're seeing in the market place today is that small and medium-sized companies around the world are expanding into multiple countries outside their home base. It's not just for the Fortune 100, Fortune 200 companies," Kathleen Ellis, a senior vice president at Chubb & Son and worldwide manager of the Multinational Risk Group for Chubb Commercial Insurance, told National Underwriter here.
According to the survey, compared to companies with annual revenues of more than $1 billion, smaller companies experienced at least a 50 percent higher frequency of foreign losses during 2007 for liability lawsuits, theft of intellectual property/piracy and theft of goods in transit.
Chubb said smaller companies also experienced at least a 35 percent higher frequency of losses for crimes against and injuries to American and Canadian employees traveling or working overseas.
Among the increasing causes of losses found were legal actions against management.
"Larger companies often have the resources needed to take the global patchwork of different laws and languages, currencies, and styles of conducting business and create corporate risk management standards throughout the world," Ms. Ellis said in a statement.
As customers or potential customers, she told NU, smaller companies expanding abroad have unique needs that need to be addressed through consultation. There are things that insurers, agents and brokers can do to help support these companies so they know how to place the coverages they need.
For example, consultants might provide information on local coverage and on whatever types of coverages might be compulsory or mandatory in a particular marketplace, she said.
Ms. Ellis said the survey also validated that globally expanding small companies are part of "underserved and sometimes unserved segment of the marketplace."
She added that whether it's a U.S. business doing business outside the United States, or customers in other countries doing business around the world, "the needs are the same." This goes for any type of business and includes procuring raw materials, distribution, sales to unserved or emerging markets, logistics and service providers, Ms. Ellis said.
She noted that the survey underscored the fact that organizations are more concerned with the stability of their own business than external threats this year.
In a prior survey done in 2007, two major threats identified were terrorism and political instability. "Neither of those showed up this year," she said, adding that this is evidence that companies are increasingly comfortable with globalization.
Chubb said senior-level executives and risk managers polled agreed that the top three threats to their business operations or business conducted outside the United States and Canada are currency risk (23 percent), supply-chain failure (16 percent) and credit risk (13 percent).
This year's survey also found that 39 percent of companies acquired final products and product components from foreign suppliers. Forty-one percent expect to increase the amount of imports in 2008.
Although a vast majority of survey respondents (85 percent) indicated that their companies have not been affected by recent reports of defective products from China and other countries, 41 percent of all respondents are taking action to help avoid a products liability event. Actions include implementing procedures to qualify suppliers (25 percent), testing imported products (13 percent) and requiring foreign suppliers to carry product liability insurance in the United States or Canada (10 percent).
The research also discovered that professional liability lawsuits are migrating to Europe and Asia.
Nearly one in four companies surveyed said they have experienced a director and officer, employment practices, fiduciary liability, or errors and omissions loss outside the United States or Canada.
"Countries in Europe and Asia have undergone significant changes in their laws and regulations over the past decade, and the impact is beginning to be felt around the world," said Jeffrey Grange, senior vice president, Chubb & Son, and worldwide manager of professional liability insurance for Chubb Specialty Insurance.
Mr. Grange advised companies of all sizes to keep a close watch on the evolving foreign legal landscape and to incorporate the professional and other liability exposures emerging from those changes into their enterprisewide risk management programs.
The 2008 Chubb Multinational Risk Survey was conducted jointly in February and March 2008 by Opinion Research Corp., in Princeton, N.J., and the Chubb Group of Insurance Companies.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.