Insurance industry 'woefully inadequate' at tackling global needs

Time to change 'is now', exec says

Insurance industry 'woefully inadequate' at tackling global needs

Insurance News

By David Saric

Globalized businesses often have a complicated production process that includes outposts and factories in various countries, and the insurance industry may not doing an effective enough job at creating a more streamlined insurance product to address these complexities.

This was the message from The Hartford head of middle market international Alfred Bergbauer, who spoke to Insurance Business at RIMS.

Add in rampant political unrest and instability, corporations and insurers alike are having to find new ways to safeguard their assets and output to avoid costly or complicated claims.

“I can’t underscore the necessity of planning an insurance package to meet the complex needs of a client,” Bergbauer said. “Our industry is woefully inadequate at doing this, and the time to change is now, especially as operating on a global scale has become more complicated.”

Rethinking an ineffective and fragmented insurance chain

What is typically implemented when a company is seeking insurance for a global supply chain is a fragmented approach to securing policies from different carriers.

“A business would buy insurance in the various separate countries it has offices or operations in,” Bergbauer said.

However, when there is a complex loss that impacts the entirety of the production chain, it can put accountability into limbo as the insurers deflect their responsibilities in paying out a claim.

“Theoretically, now you will have multiple carriers now saying, ‘it’s not my loss, it’s theirs’, which can impede on solving a business disruption quickly and rectifying the situation,” Bergbauer said.

To effectively address global client needs, Bergbauer said that insurance stakeholders need to:

  1. Understand the ins and outs of this chain through the specialty market.
  2. Be able to construct a product or package that responds to these complexities.

“No matter what you make, it is in a complex chain,” Bergbauer said.

When a broker takes the time to really address the intricacies of global production and the risks that are involved in that, they can provide a detailed summation to an insurer.

“Upon receiving this information, a carrier would appreciate the in-depth research that has been conducted,” Bergbauer said. “They can then put a structure together, that's really going to meet the risk financing needs of a customer.”

Economics and global politics becoming “inextricably intertwined”

At RIMS, Insurance Business also sat down with Adrien Robinson, executive vice president of global specialty at Navigators, a subsidiary of The Hartford. Robinson shared how the intertwined nature of geopolitics and economics is influencing how businesses and insurers can work more effectively.
While companies have established operations in countries across the globe, there has been an inherent melding of geopolitical strife and economics that has become more inescapable, according to Robinson.

“The two are inextricably intertwined,” Robinson said. “But that wasn’t always the case.”

One of the main reasons behind this coalescence was the COVID-19 pandemic, where more democratic countries were more mindful of doing business with nations that have a proven track record of not being so friendly to others, according to Robinson.

This has only been exacerbated by the war in Ukraine.

“This mixing of geopolitical issues with politics is happening at a rapid speed,” Robinson said.

“What was expected to happen over decades occurred in a span of three years.”

From an insurance standpoint, the number one goal is ensuring that workers who may be deployed in these highly contested areas are safe and have proper protocols to respond to any claims related to worker safety. 

Secondly, while insurers can provide products and packages that will allow a business’s globalization plans to move forward, carriers can also tap into their wealth of expert knowledge to guide them on their path on expansion to make sure it is done properly.

“While insurers have coverage and are willing to follow this corporations around the world, we also must be effective at analysing and preparing for emerging risks due to the volatile political climate worldwide,” Robinson said.

This includes finding solutions for events that are deemed uninsurable, especially confiscation, which was prevalent in Russia after sanctions were placed on the nation when it first entered the Ukraine.

“Leaders in boardrooms across the globe are aware of this and trying their best to mitigate any further disruptions or potential losses,” Robinson said.

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