Working with carriers is one of the most common ways for agents and brokers to reach out to the global marketplace. A perfect example is the story of how Capacity Coverage Co. of New Jersey, Inc. worked with Chubb to develop a relationship in China and ultimately established a division based on reverse-flow insurance, said Martin Lebson, vice president of Capacity Coverage and a director of the AIMS Society.
Now a niche-rich brokerage ranked among the top 50 in the country, Capacity began 20 years ago through a merger of the current partners. In its original form, Capacity had already been conducting international business through a marine department and reverse-flow business for some heavy products liability exposure accounts. But the brokerage's multinational business really started taking off five years ago, when Wally Gardner, senior vice president at Chubb, asked Lebson for assistance in sending AIMS Society modules for selling insurance to China. "We e-mailed him the material, they had it translated into Mandarin, and Wally and I went to Shanghai," Lebson said.
While in China, Lebson made contacts and considered the trip as an opportunity to expand his business's reach into the Far East. When he returned the next year, Lebson used his Chinese connections as a springboard to establishing Capacity Worldwide Consulting Group LLC, of which he is president, a division of Capacity that specializes in reverse-flow business insurance, programs designed for U.S. subsidiaries of foreign-owned parent companies. "We get referrals from various sources and place business for companies from China, the UK, France, Mexico, South America, Australia and elsewhere," Lebson said. "We're also working on an opportunity to open up in Russia, although the challenge of an unstable market is holding us back. Eventually we hope to write auto, business, fleet and marine insurance there. That would be a direct presence writing local Russian business."
Lebson said it's important to recognize whether a country's economic market is mature enough to support insurance growth. "In China, for example, most people don't have homeowners coverage and many businesses don't understand why they need liability insurance because China's legal system is very immature compared with ours," he said. "And when we write coverage in the U.S. for Chinese companies, there is sometimes a reluctance on their part to write product liability, for example; they just don't think they need it. But customers won't be happy to get a certificate of Beijing Mutual, they want American paper."
This mindset isn't restricted to developing countries, either. "We wrote an account from France last week, a robotic seller opening a location in Massachusetts," Lebson said. "We were referred to the company by a French broker. The company didn't think they needed product liability. The company has worldwide coverage with a big carrier that includes products, but we weren't able to get the underwriter in France to produce a certificate. It took us two weeks to get the account so they could get the key to their office."
Educating foreign clients on business risks that most Westerners see as rudimentary is a big part of the job. "I have one client, for example, who imports ingredients for a vitamin drink from China to the U.S. Another imports small platforms for bricklayers. Although neither have had any claims, from our perspective, both businesses potentially face real liability issues."
Another aspect about international risk is the potential for the type of crime exposures we don't face in the U.S., Lebson said. In Russia, for example, "crime is huge," especially hijacking of transit and ocean cargo— "sometimes the coverage from the pier to the warehouse in Russia has been a problem." Capacity Chairman Mark Weinraub has gone to Russia in an attempt to establish relationships with businesses, but the crime situation and other aspects still don't make it conducive to doing business there, he said.
"Insurance is a necessity for the incredible growth of capitalism in Russia," Lebson said. "Education to develop an appropriate insurance marketplace is vital and the government is working hard to control crime. Risk control and risk management are needed to control losses, such as the unexpected summer fires last year.
Lebson concedes that attempting to expand overseas can be daunting, especially for smaller agencies that don't have the resources and are too small to access producer networks. "There are probably many countries you could think of that would be great to have a presence in, but realistically, how many can we deal with at one time? It definitely takes time and resources to get into foreign markets," he said.
For most players, the best approach is to be alert when a client opens a foreign branch or starts to ship products to another country for manufacture. "Once there's an exposure, their companies can help them provide coverage. And if they won't, companies like Chubb and Chartis might be able to do it," he said.
Although more rarely used, individual relationships can also spur global growth for smaller agencies. For example, someone on staff could have personal contacts in another country and perhaps a familiarity with the language and culture, which would make a good fit for expansion.
And speaking of cultural differences, you'll need to be aware of them in order to best take advantage of the growth a foreign country can offer. "You must learn to be patient and realize that you're dealing with someone in another country," Lebson said. And although most do speak English, misinterpretations can cause problems, especially in interpreting messages in "Chinglish," Lebson said.
"We recently were dealing with a new entity in the U.S.," he said. "We sent the CEO in Europe an application and were puzzled when he completed a section of the application with sales figures, etc. It turned out that he thought 'prior' sales meant projected future sales."
Another issue to consider is that of splitting commissions, if the brokerage is referred by a broker in the foreign country. "Our position is that if it's a small or medium account, we don't do it; if it's a bigger account, we can make some arrangement, but this can be a problem legally if the foreign broker isn't licensed."
Lebson's final words of advice for agents and brokers venturing into multinational business: "Don't be afraid, but be careful; make sure you do a risk management survey as carefully as you can to determine what your client's exposure is in the other country regarding transit, business income, and if you are writing reverse-flow business, study the exposures in the U.S. that should be covered that may require some education on your part to explain coverages needed here."
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