As they shop their insurance needs, multinational corporations are still enjoying the benefits of a buyer-friendly marketplace.
"It is a very competitive environment, and that is good for clients," says Sam Cargill, president of global accounts for Aon Risk Solutions.
Rick Jensen, managing director for Willis International, a member of insurance broker Willis Group, adds that insurers are strongly defending their incumbent accounts and are willing to deal.
"And there is a lot of capacity for most normal risks," Jensen says.
But underwriters, impacted by recent catastrophes, are taking a closer look at certain risks.
For example, the earthquake/tsunami in Japan and floods in Australia are having an effect on certain programs, primarily catastrophe property and business interruption.
IMPROVED GLOBAL EFFICIENCIES, BUT SMALL POOL OF BIG PLAYERS
In addition to pricing that remains attractive for most risks, another bit of good news for insurance buyers and their brokers is that the number of carriers offering global services efficiently is increasing, at least according to Ron Whyte, co-head of the international division of Integro's international practice.
"A lot of carriers in the past offered multinational programs, but it was appalling—a mess, a nightmare," says Whyte. "Now carriers are better handling the challenges" that come with servicing global accounts.
Asked to name names, Whyte says major insurers such as Chartis, Ace, Chubb and Allianz are some of the players that have a "good spread and global systems."
Elizabeth Francy Demaret, managing director, multinational client service director for Marsh, defines a multinational account as a central buy for more than three countries. As with her broker colleagues, Demaret characterizes the current environment for multinational clients as "a good market" where capacity remains available.
But one of her major concerns is that while the number of efficient players may be growing, per Whyte, the overall pool remains quite small. "There are not 100 [insurers] doing this" type of business, or at least doing it well—just a limited choice of fewer than a dozen players, she says.
Sherry Gonzalez, managing director and practice leader for insurance broker Arthur J. Gallagher, agrees, observing that for the biggest accounts there aren't many players that can handle large international programs.
A major reason for the small number of carriers is that to be a global force a company needs contacts in more than 60 countries, Demaret notes.
Dealing with this daunting reality requires a considerable amount of administration. That causes a lot of insurers to "come in and out" of providing [multinational program] coverage, Demaret says. More often than not, programs may be split to deal with the realities of individual insurance markets.
"There are few truly global programs at the primary level," says Demaret.
But as companies grow globally, they want insurance partners that can accompany them into foreign markets—a fact that is forcing at least some insurers to broaden their products and the geographic reach of their network in order to keep pace—and keep the account, says Aon's Cargill.
For those carriers that can meet this demand for truly international service, a big upside exists beyond just an increase in premiums.
Usually, as the program grows larger and more global, the bond between carrier and client becomes "sticky," and there is less urge to change, notes George Haitsch, practice leader, Willis Risk Solutions, a part of insurance broker Willis Group Holdings.
"Something strong needs to happen to motivate change" in these types of accounts, says Haitsch.
CATASTROPHE-HIT COUNTRIES
While the markets remain competitive overall, the catastrophes in Japan and Australia are having an impact on pricing and capacity in some insurance types.
Over the past five months in Japan, for example, earthquake coverage has increased, and "capacity now has a price that is higher than 90 days ago," says Demaret.
The earthquake in Japan has also impacted contingent business interruption (which covers a company's operations when they are disrupted by the failure of an outside supplier), as underwriters are requesting more information about a company's exposure and asking more questions.
"The market impact [in Japan] is just beginning," says Jensen.
Gonzalez adds that currently it is "quite tough" to get earthquake coverage in Japan and flood coverage in Australia—and that there is a moratorium in some cases on underwriting "depending on the client."
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