12 November 2014Actuarial & underwriting

Ace urges risk managers to re-examine capabilities

Ace has urged risk managers at multinational European companies to re-examine the capabilities of their global insurance partners.

The recommendation follows recent research by Ace, which suggests that 70 percent of European risk managers have increased their use of captive insurance arrangements over the past three years to help manage their multinational risks

The report, called ‘Structuring multinational insurance programmes – anticipating emerging global challenges for captives’, was released during the European Captive Forum in Luxembourg and is authored by Suresh Krishnan, executive vice president, global accounts at Ace; Suneeti Kaushal, insurance manager at Ikano Insurance Advisory; and Rémy Massol, director of multinational services for Continental Europe at Ace.

The report sets out key themes for captive owners to consider when implementing a multinational insurance programme. These include: prioritising transparency of documentation and cash flow; evaluating the implications of increasing international scrutiny of tax, capital, and solvency issues; ensure that the ability to value, adjust, and pay increasingly complex claims across borders is incorporated within the multinational insurance programme and understanding the implications of a multinational insurance programme on captive credit exposure and ensure that they discuss credit risk fully with their global insurance partner.

Krishnan said: “Financial strength, underwriting acumen and price are important criteria for captive owners when choosing a global insurance partner. In today’s complex international regulatory and operating environment, the requirement for best-in-class service and use of leading-edge technology to effectively manage programme performance should also be given due consideration.

“Transparent claims-service standards that are agreed before the programme is bound; metrics that objectively measure the performance of local premium payments and local policy issuance; a clear credit-risk methodology; and broad breadth in compliance know-how, are all equally important aspects of an insurer’s global capability and, ultimately, of a successful captive insurance programme.”

Suneeti Kaushal, insurance manager at Ikano Insurance Advisory, added: “As clients, we want to work with insurers who are value-adding partners; partners who will critically examine our assumptions, and who will work with us to inform and navigate the complex, but varied, regulatory and compliance demands of each country in which we operate.

“Captive owners and managers should insist on an insurer-partner who has the information owners require to make properly considered decisions about the structure of their multinational insurance programme, and who will explore with them potential scenarios and stress-tests to establish how their multinational insurance programme will respond to particular claims situations.

“It is important to work through the difficult questions with the insurer-partner at the beginning; agree on service standards and guidelines; establish clear communication channels and the means to access information, all long before the inevitable claims-event that will test the integrity of a multinational insurance programme.”