Global programmes for financial lines and specialty risks are often approached with a level of simplicity that does not reflect how they actually function. That gap, according to Charles Froment (pictured), head of global programmes and product development at Tokio Marine HCC, is where problems can begin.
Speaking to Insurance Business UK at the Axco Global Insurance Summit, Froment said global programmes are frequently treated as a single structure, when in practice they consist of distinct products with different characteristics.
“They are sometimes approached as a coherent whole as opposed to a constellation of widely different products,” he said.
That assumption, he added, is a “misperception”, but an understandable one. Compared with more established lines such as property or general liability, local policies in financial lines and cyber can appear more straightforward. They are often less constrained by local regulations or underwriting requirements and can be structured with shared limits across jurisdictions, creating the impression that they are easier to design and implement globally.
Specialty products such as directors and officers (D&O) liability have developed relatively mature global programme structures. Cyber, by contrast, introduces additional complexity, starting with the way coverage is constructed.
Unlike D&O, which is purely liability-based, cyber combines multiple elements, including first-party loss, business interruption, liability and incident response. That structure does not translate consistently across jurisdictions.
“You have opportunities to see that cyber requires a considered approach, rather than a transactional one that can be applied for D&O programmes,” Froment said.
Part of the issue lies in how the market has evolved. Cyber expertise has often developed out of financial lines, which can lead to expectations that programme design will follow similar patterns. In practice, those expectations do not always hold.
For Froment, the underlying issue is not just complexity, but sequencing. Cyber global programmes are often structured with discussions around pricing and capability taking place before the fundamentals of programme design have been fully considered.
“Often this is done upside down,” he said.
The consequences tend to emerge later, particularly when insurers, brokers and clients attempt to align coverage across multiple jurisdictions after initial assumptions have already been made.
Before alignment can be achieved, there needs to be clarity on where alignment is required and where it is not. That question is relatively straightforward in more established lines, but less so in cyber, where coverage continues to evolve and varies between markets.
Even where alignment is intended, practical constraints can limit what is achievable. Differences in regulation, local market practice and wording flexibility can all create barriers, some of which cannot be fully resolved, or that resolution could come at a cost that may have been underestimated in early stages.
The impact of those early assumptions often becomes visible when programmes move from design into implementation.
“The moment where a global programme is likely to break down is at that early stage, where promises are being expected or given before an entirely considered approach being taken,” Froment said.
That breakdown can occur at different stages, during programme design, policy issuance or claims handling, but is typically linked to expectations set before the structure of the programme has been fully defined.
Without that foundation, oversimplistic expectations set in early stages become too difficult to meet as constraints emerge, which is where “cheap becomes expensive,” Froment said.
