7 trends in multinational insurance programs

By: Allianz Global Corporate & Specialty

In today’s fast changing world, companies face risks that span borders and regulatory regimes, which is resulting in a growing interest in multinational insurance, a fully end-to-end customized service for the cross-border exposures of organizations, including risk transfer and captive services.

These are some of the current and future trends in this space:

1. Cross-border exposures have never been more volatile for multinationals. Expect the unexpected.

The volatile socio-political environment has dramatically impacted the risk landscape, presenting risk managers with the challenge of how best to protect their companies in the face of conflict, political unrest, economic risk, supply chain disruption, increasing cyber threats and climate change. Most experts, including Allianz Risk Barometer respondents, predict that businesses will continue to experience significant disruption around the world for some time yet. Scenario planning is vital to plan for the growing number of crises, as is ensuring holistic insurance cover is in place.

2. Regulatory challenges, a broadening customer footprint and lower entry barriers mean the market is poised for sustained growth.

The global programs market is set to grow in 2023 and in years to come. It is already estimated to be worth in the region of $50bn according to industry estimates [1]. Anticipated drivers of future growth include: our ever more interconnected world, a broadening customer footprint as international companies expand, the increasingly complex regulatory, tax and reporting environment around the world, and lower barriers of entry as digital tools and portals help facilitate service improvements. Global programs ensure full insurance coverage and can help prevent any regulatory violations. At the same time, global risk consulting and claims services are becoming increasingly important, given this current environment.

3. Digitalization is unlocking real-time data and enabling greater collaboration

Companies have woken up to the power of data in their businesses, and increasingly want to conduct business digitally. When it comes to global programs, firms now expect much faster turnaround times than in the past.

In response, the world’s leading insurers are turning to digitalization to improve how they operate global programs, speeding up systems and improving data collection and analytics, including 24/7 accessibility and real-time updates. API (application programming interface) technology is enabling a more streamlined, real-time exchange of data between stakeholders. Such improvements are enabling greater transparency over what is covered under a local policy and what is covered under a master. Any potential gaps can then be easily identified and addressed, making things easier for clients, brokers, and insurers alike.

Ultimately, digitalization is helping to deliver a better and deeper understanding of risk. It is making it easier for risk managers to take an active role in risk management, offering increased access to data and greater levels of collaboration with insurers and brokers, both of whom, in turn, can then spend more time on client-focused activities.

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4. Growing use of captives alongside global programs

Many multinationals are increasingly using their captives alongside their global programs, either with or without risk transfer or as full-service captives. Captives are growing in popularity, particularly if there is a lack of capacity in certain areas or effective rate increases on certain lines of business means that for companies either increasing utilization of the captive they have or forming a new captive or cell captive is an attractive option. Financial lines, errors, and omissions, D&O and cyber have been among the most popular lines of business for multinational captives.

A captive is an invaluable tool when it comes to coordinating the different covers of various subsidiaries around the world and collating risk information on exposures and losses.

5. Post Covid-19, the awareness of the need for greater contract certainty is growing

The pandemic brought some challenges that tested the relationships between risk managers and insurers, particularly around which risks were covered, and which were not. This has led to a greater focus on contract certainty and data analytics, as well as increasing interest in global programs, which can be a valuable tool for helping multinational companies tackle the ever-evolving risk landscape.

Contract certainty is one of the big insurance lessons learned from the Covid-19 pandemic. There needs to be better greater clarity around what policy wordings mean to have a better understanding of what is and what is not covered.

Global programs deliver full transparency over what is covered under a local policy and what is covered under a master. Any potential gaps can therefore be easily identified and addressed as needed, making things easier for all parties.

6. Global programs can help organizations with ESG and emerging risks

Environmental, social, and governance (ESG) issues are increasingly landing on the desks of risk managers. Multinationals face growing interest and increasing scrutiny from regulators, investors, customers, and employees about their ESG footprint.

In global programs, ESG is integrated into underwriting via industry leading rules and tools, while technology and data analytics is increasingly delivering better insights into big, emerging risks such as climate change, cyber and global supply chain issues.

7. Don’t forget the growing influence of AI and the metaverse

Artificial intelligence (AI) applications bring benefits such as increased efficiencies, new products, and fewer repetitive tasks, while the metaverse – the space where interconnected physical and virtual realities converge – has the potential to provide experiences not available in the real world, giving rise to a booming virtual economy.

Insights gained from AI-powered analytics and data could expand the boundaries of insurability, extending existing products, as well as giving rise to new risk transfer solutions. However, as with any disruptive technology, increasing usage of AI and engagement with the metaverse will also introduce new risks and potential liability scenarios to society. To ensure their safe and secure use, both will need rules among users and platform providers and appropriate measures for enforcing them.

** [1] Insurance ERM, Swiss Re’s primary ambition, February 6, 2023