Insurance Considerations for international businesses

By William Skapof and John Lopes | February 20, 2021

International markets provide ample opportunities for growth for U.S. companies. Additionally, given advances in technology, reduced barriers to entry and the ease of travel (in a post-pandemic world), becoming an international organization has become easier than ever and is no longer exclusive to large, multinational organizations.

However, as businesses expand their operations across international borders, they open themselves up to potential exposures—exposures that are easy to overlook and are not covered by traditional, domestic insurance policies. Businesses have to realize that, simply by selling products in another country, there are substantial risks to consider, underscoring the importance of proactive loss control measures.

This article provides an overview of international business exposures, highlighting considerations organizations must keep in mind.

Coverage considerations

Organizations must have the proper insurance in place if they are to protect themselves from exposures associated with conducting business internationally. However, it’s important to remember that, as organizations do business abroad, their insurance doesn’t often travel with them. For instance, just because a company has domestic workers’ compensation insurance in place doesn’t mean their employees are covered should they become sick or hurt themselves abroad.

As such, organizations need to evaluate their exposures and ensure they have the proper coverage in place—coverage that will respond to claims that may arise abroad. This is particularly important when you consider that every country regulates insurance differently, and various terms and conditions may be easy to overlook. Limits on policies that are sufficient stateside might not provide ample coverage in foreign countries. Put simply—given how language barriers, local laws, customs and norms differ from country to country—insurance claims for international businesses can be complex and difficult to navigate.

To address these concerns, international businesses can help mitigate their risks in one of the following ways:

  • Businesses may secure separate, local insurance policies in each country where they have exposures. These policies are written to account for local industry practices and regulatory requirements.
  • Businesses may utilize a global or master insurance policy. These policies may be issued in the business’s home country and account for worldwide exposures/coverages. Additionally, these policies provide consistent terms, conditions, limits and umbrella attachment points.
  • Businesses may utilize what’s known as a controlled master program (CMP). CMPs combine multiple local policies issued in various countries with a global master policy that sits over the local policies. CMPs are often written on a difference in conditions/limits basis. This means that, if a claim isn’t covered under a local policy or the limits of the local policy are exhausted, the global master policy will likely kick in to provide coverage.

Regardless of how a business structures its insurance programs, it’s important to remember that no two organizations are alike and there is no one-size-fits-all approach to managing international risks. Before purchasing a policy, companies should examine their business and personnel in order to select the right coverage options. The types of events businesses may want to plan for—in addition to the traditional property and casualty coverages—include kidnappings, hostage and ransom crises, assaults with weapons, extortion threats, evacuations and medical care/repatriation.

Employee safety considerations

For international organizations, many tasks require employees to travel abroad, whether it be to meet or work with potential clients, partners, suppliers or buyers, or to attend training seminars or conferences. While the COVID-19 pandemic has limited this type of travel in recent months, businesses will eventually resume normal operations, and firms need to have a plan in place to keep their employees safe.

This is especially important when you consider that, at any point when traveling abroad, employees can injure themselves or become ill. What’s more, kidnapping, ransom and extortion may sound like threats straight out of a movie, but they are very real concerns for organizations of all kinds.

To protect their employees abroad, employers will need to take the following into account:

  • Policies—Organizations should consider implementing an abroad travel policy. This policy should explain any relevant approval processes for travel and establish a system that evaluates specific risks associated with various travel destinations. In addition, policies should consider how the organization will keep employees safe while they’re off-site. This may involve detailing how accommodations and transportation will be secured or who to contact in an emergency.
  • Training—Employees need to be trained on how to respond to emergency situations abroad. At a minimum, training should outline what employees must do if they are injured or get sick abroad. Employees should also familiarize themselves with the local customs and laws of their destination before arriving.

Unique exposures

When conducting business abroad, most companies focus on overall strategy—how to increase sales and market share while limiting costs. And while moving into different markets can be lucrative and creates growth opportunities for an organization, it does open businesses up to unique exposures. The following are a few examples of the increasing challenges facing international businesses:

  • COVID-19—COVID-19 has impacted businesses across the globe, creating both short- and long-term disruption. For international organizations, not only do they have to consider COVID-19 threats that affect their domestic operations, but they must also account for how the pandemic affects their business overseas. Depending on where the organization is doing business, COVID-19 has the potential to interrupt supply chains, cause long-term shutdowns or stagnate logistics. There may even be differing, complex rules as to how businesses are expected to mitigate COVID-19 risks. What’s more, COVID-19 introduces a level of uncertainty when it comes to available insurance protection. During the initial lockdowns, it was unclear whether things like business interruption, liability, or directors and officers policies could provide the protection needed during a pandemic. The future is equally uncertain, as the pandemic could change the types of coverage carriers offer, how they’re offered and where they’re offered.
  • Changes in laws and regulations—When governments introduce new laws or change their existing regulatory framework, business operations may be negatively impacted. Governments often target foreign businesses or certain industries with unfavorable restrictions that could potentially eliminate the viability of conducting business abroad altogether.
  • Restrictions on imports and exports—Sudden changes in import and export restrictions can greatly increase the cost of doing business abroad. Countries often center their tariff and trade barrier strategies on protecting consumers and domestic companies. What’s more, an embargo or the cancellation of an import license can spell disaster for a business operating abroad.
  • Breach of contract by a foreign government—When a contract breach occurs (e.g., nonpayment or unwarranted contract termination), it can create losses for businesses. This can happen without warning, and the financial loss can be difficult to make up.
  • Expropriation—This occurs when a government or other public agency seizes, sometimes unlawfully, private property in the name of public interest. This can cause losses of physical assets and revenue.
  • Political turmoil—Unsafe conditions due to war, terrorism, civil strife or other forms of political violence can lead to the total abandonment of an investment.

The type and potential impact of political risk varies by country. It’s important to remember that some countries are more stable than others, and political risk tends to be greater in developing regions.

Work with the experts

While international businesses have their own set of unique exposures, these challenges shouldn't scare businesses away. Instead, to capitalize on growth opportunities, businesses should work with experienced insurance professionals who can help them navigate the risks associated with international operations. Above all, organizations should partner with a producer and insurer that not only has experience in the space, but will also work closely with the business to assess its risks and create a plan tailored to its needs. Furthermore, because it can be difficult to manage international risks virtually, having boots on the ground—whether it be through an insurance representative or brick-and-mortar location—in all the local jurisdictions in which you work can go a long way toward understanding the unique exposures that threaten your business.

Learn more about multinational solutions through Nationwide’s innovative joint venture with Generali Global Corporate & Commercial, a top global insurance company based in Italy. In 2020 the two companies announced the creation of N2G Worldwide Insurance Services, LLC (N2G), to support multinational solutions for international commercial clients. If you’re an agent interested in growing your multinational book of business, please contact [email protected].

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About the Experts:

Bill Skapof, Chief Executive Officer, N2G

William (Bill) Skapof is the CEO of N2G. Prior to leading N2G, he joined Generali in 2015 to build its U.S. and foreign markets, serving as Executive Vice President and Chief Underwriting Officer for Generali in North America. He is a senior P&C underwriting sales executive with more than 30 years of experience developing highly successful product, distribution and sales strategies in support of global commercial markets, having established successful multinational capabilities for Chubb, AIG and Zurich.

John Lopes, Senior Vice President, Product Expansion, Nationwide

John Lopes leads the Management Liability and Specialty programs division and Alternative Ventures at Nationwide. With more than 30 years of experience, John is an expert at managing profitable portfolios across Management, Professional and Specialty Lines of business. He has extensive expertise in both the open brokerage and program approaches to the business, and has spent the majority of his career managing primary books of business.

John joined Nationwide in January 2008 and has built extensive relationships over the years at the retail and wholesale brokerage levels as well as with the reinsurance community. He enjoys taking on new challenges, pursuing innovation within existing products, and exploring emerging areas of risk. In addition, he is a member of the Professional Liability Underwriting Society (PLUS) and is an active community service participant, dedicating time to the homeless youth program Covenant House and United Way of Long Island.