Designing an International Insurance Program
It's a complex undertaking. However, the right strategy and tools help optimize performance and boost bottom-line results

Today's global environment presents enormous challenges. But nowhere are the risks greater than in the arena of multinational risk financing. There are cultural issues to address, regulations to confront, business processes to manage and actual risks to understand. "It's critical to deal with a number of core issues in order to build a profitable business," says Andrew Tunnicliffe, CEO, Aon Global Risk Consulting.

Developing a viable strategy is paramount. However, there's no singular template for coping with today's business environment and highly unpredictable world. Tunnicliffe says that both insurer and the insured benefit from viewing the big picture while focusing on the specifics of each geographic office or region. "It's critical to determine which business practices and processes work best in a particular country or region and design a program around them," he points out.

Equally important is achieving the right balance between the use of centrally coordinated risk management initiatives and that of local resources to manage and mitigate risk in a systematic way within the business. Similarly, the correct positioning of conventional insurance and captives to finance risk the organization is not able or willing to tolerate is important to get right. This decision has to be made at both the business unit and global levels. According to Laurie Champion, managing director, Aon Enterprise Risk Management Consulting Practice in the U.S., "Organizations that understand their risk profile—and their risk tolerance—are better able to make the right strategic decisions about how best to structure multinational insurance programs that appropriately balance local and corporate needs."

Tunnicliffe says best-practice firms focus heavily on the following seven key issues:

Avoid culture wars. "It's critical to create a common risk culture across business units and geographies and ensure that everyone is aligned and in sync," Tunnicliffe explains. Although it's important to recognize that cultural differences will inevitably exist, there will always be a resounding need to build a risk management framework that functions for the entire organization. For example, Tunnicliffe says, "one geographic location may feel that their standard of risk management is better than another or they're paying more or being treated unfairly. Locations must recognize that there are differences in risk profiles and that practices are designed in the overall best interest of the company rather than individual locations." He recommends using analytics and consulting expertise to support program design and building as much transparency as possible into the program. Champion supports that viewpoint by suggesting that "risk analytics enhance an organization's ability to encourage desired risk management behavior by enabling risk-weighted cost allocations for both self-insured risk and insurance premiums."

Focus on consistency. A major challenge for many organizations, Tunnicliffe says, is different approaches toward risk management and claims tossed into the same framework. "It's essential to identify risks that exist across geographies and attempt to introduce common risk control standards as well as claims management systems," he says. That way, "there's no question how a claim will be handled at any location." Tunnicliffe adds that this method also reduces the risk of a group or a location underinvesting in risk control activity or missing out on best practices. "It ensures that business units and geographies are doing what's best for the organization overall."

Understand business units and how to meet specific financial demands and needs. Not surprisingly, different business units frequently exhibit different risk tolerance thresholds for insurable risk. Across a multinational organization the differences can be significant. What's more, one office might be highly profitable while another might operate with thinner margins, but there is a significant interconnectivity both operationally and financially, which creates further complexity. "Very often organizations resolve these challenges by using a flexible captive program providing buy-downs from the group level, recognizing the specific demands and needs of the business units," Tunnicliffe explains.

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