More than half of European companies feel doing international business has become riskier over the past five years, according to a research report from ACE Group.
Earlier this year, ACE conducted a survey of over 600 European companies in the United Kingdom, Germany, Italy, Spain and Benelux (the economic union of Belgium, the Netherlands and Luxembourg). The survey asked about six areas of risk: terrorism and political violence risk; environmental risk; multinational and export risk; information technology and cyber risk; directors' and officers' liability risk; and business travel risk.
The survey, conducted by Opinion Matters, queried risk managers, chief risk officers, chief financial officers and chief operating officer, and others responsible for buying insurance at a company with more than £500 million profit (U.S. $806 million).
Fifty-two percent of those surveyed feel that doing international business has become riskier over the last five years and 95 percent feel their company is more concerned about multinational and export risk during that same period, the report says.
The survey finds that nearly half of European companies feel either under-prepared or completely unprepared to deal with multinational and export risk.
When asked which particular areas they believe their multinational operations are most exposed to today, 46 percent of respondents highlight directors and officers risk, 39 percent say environmental risk, 38 percent point to reputational risk and 35 percent say liability risk are their top exposures.
Clive Hassett, director of multinational services for ACE European Group says in a statement, "Since the onset of the global financial crisis, many businesses have increased their focus on growing overseas revenues at the same time as we have seen a sea-change in the global regulatory and compliance environment. So perhaps it isn't surprising that nearly half European companies feel underprepared to deal with multinational risks."
ACE says that there are four key factors cited by European companies that have caused them to reassess their approach to multinational and export risk recently: disruption from catastrophes—cited by 42 percent of respondents; financial crises—38 percent; greater dependency on overseas earnings—37 percent and international terrorist events—33 percent.
Despite these concerns, only half of European businesses currently have a multinational insurance program in place to cover their global risks, ACE points out.
Overall, just 13 percent of companies believe they have an insurance program that is well constructed for their multinational needs. Fifty percent of companies believe there are significant gaps in coverage and 41 percent say there are significant gaps in compliance.
When asked which areas of compliance concern them most, respondents identify local policy compliance—48 percent, claims settlements—40 percent, and 36 percent point to consistency of coverage (difference in coverage or difference in limit coverage).
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