Navigating the Complexities of Multinational Property Risk
Operating a multinational business presents unique challenges, particularly when it comes to safeguarding assets and mitigating property risks. In today’s dynamic environment, marked by economic shifts and increasing natural disasters, having a robust property insurance strategy is more crucial than ever. This is where a strategic partnership with a seasoned insurer like AXA XL becomes invaluable.
The commercial property insurance market has experienced considerable volatility in recent years. While some areas are seeing stabilization after rate increases, it’s not a time to become complacent. Businesses must remain proactive in their risk management approaches. Michele Sansone, CUO Property and Multinational Solutions at AXA XL, emphasizes the importance of risk mitigation and property risk engineering for multinationals.
One effective strategy is implementing a multinational property program that integrates comprehensive risk management across all operations. This approach brings insurers and property owners together to address the evolving challenges inherent in global operations. Let’s examine the core components of a strong multinational property program and explore how businesses can work with their insurance partners to maximize its effectiveness.
The Persistent Nature of Property Risks
Even with market stabilization, the underlying risks associated with commercial properties remain significant. Natural disasters such as hurricanes, wildfires, and other extreme weather events continue to pose a threat. In 2024 alone, the U.S. witnessed 24 separate disaster events, with each incurring losses exceeding $1 billion. These events, coupled with geopolitical uncertainties — such as the ongoing conflict in Ukraine — and inflationary pressures, underscore the need for adaptable risk-management strategies.
Sansone highlights that the focus often goes beyond the immediate effects of a disaster. “The primary challenge lies in the cost of transporting goods from one location to another and understanding the potential business interruption impact resulting from these costs, rather than the supply chain itself,” she explains. Even minor disruptions, like equipment damage in a foreign country, necessitate careful planning and foresight.
Key Benefits of a Multinational Property Program
The primary objective of a multinational property program is to provide comprehensive risk management for businesses operating globally. The creation and maintenance of a program like this can appear complex, but the benefits of a global system are extensive. Firstly, it provides a worldwide view of the business, improving risk assessment. Secondly, a global program allows for data collection and analysis that supports better decision-making. Moreover, it enables more cost-effective operations by leveraging global purchasing power and reducing redundancies.
Leveraging Local Expertise
Multinational property programs often rely on insurers to front their operations. This often includes using a local insurer in each country to issue policies because it enables alignment with local regulations while maintaining control over the global risk strategy.
The fronting partner utilizes local insurance expertise to gain a better understanding of regional risks and the regulatory environment. Local expertise also assists in navigating cultural differences and building strong relationships with stakeholders in different areas. Moreover, this can expedite and streamline the claims resolution process.
Sansone stresses the importance of providing valuable information to clients. “Our goal is to provide consultative advice when we review and offer insurance solutions,” she says.
Best Practices for Effective Risk Management Collaboration
For a multinational to commit to a global property program, the makeup of the insurance team is of great importance. Strong insurers have both the necessary knowledge for managing risk across borders and an internal network designed to collaborate with the multinational partner. This collaborative approach extends beyond interactions between underwriters and clients, encompassing involvement from claims and risk engineering teams.
Risk engineering is essential in helping clients mitigate risks. These assessments contribute to the development and refinement of more efficient risk mitigation strategies, often leading to lower potential costs. “Loss estimates are an essential aspect to the information risk engineers provide. If we base all loss estimates on outdated information or property values, we are likely to see very high numbers — a worst-case scenario for an underwriter,” Sansone observed. “But if an engineer informs us about risk mitigation measures like sprinklers and shut-off valves, the potential charges will be lower.”
For effective collaboration, access to the claims team is vital. A familiar claims team can enable an insured to ask questions or address the concerns of senior management. In Sansone’s view, “Providing them with a point of contact for future questions is invaluable.”
AXA XL’s Commitment to Comprehensive Solutions
AXA XL is committed to providing extensive support for its clients to manage today’s complex property risks. Sansone and her colleagues prioritize offering customized insurance coverage designed to meet the specific needs of their partners. “Clients are increasingly asking questions and seeking advice on their property insurance and risk management strategies,” Sansone acknowledges. “We leverage our local market knowledge and expertise to provide better risk assessments and management tailored to our clients’ specific regional needs.”
To streamline administration and reporting, AXA XL recently launched its Multinational Solutions Portal. The portal provides a central hub for the management of multinational insurance programs. “Users have a clear overview of the global property program including where instructions have been given, the status of policy issuance and copies of issued policies. They have access to all of their policy information and data in one place including the number of countries covered, policies instructed, issues and outstanding,” Sansone explained.
With the overarching goal of providing businesses with confidence in the complexities of global operations, AXA XL’s multinational solutions go beyond basic offerings. Sansone states, “When a client approaches us to front their program and provide evidence of insurance in all the countries where they operate, we conduct a thorough analysis. We examine the exposures in each country to determine the significance of having a local policy. It’s crucial to ensure that the policy issued in each country is compliant and has the appropriate limits, coverage, and premium charge.” This comprehensive approach ensures that clients are equipped with the utmost confidence in their insurance coverage and global risk mitigation strategy.
