Navigating Global Risks: Property Insurance Strategies for Multinationals
Operating a multinational business presents a complex web of challenges, especially when it comes to managing property risks. Economic pressures, inflation, and the increasing frequency of natural disasters demand robust mitigation strategies and strong partnerships with insurance providers.
While the commercial property insurance market exhibits signs of stabilization after periods of volatility, the need for proactive risk management remains paramount. Focusing on these key strategies can help organizations drive optimal solutions.
“The outlook for the commercial property insurance market is still cautious, even with a sense of stabilization occurring. Insurers need to balance rate pressures and responsible underwriting practices. I believe, for multinationals, an emphasis on risk mitigation and property risk engineering will be essential,” explains Michele Sansone, CUO Property and Multinational Solutions at AXA XL.
One effective strategy is a multinational property program, which can enhance risk mitigation capabilities across an organization’s global footprint. These collaborative programs unite insurers and property owners to address the diverse and evolving challenges facing businesses around the world.
The Ever-Present Threat of Property Risks
Even with some market stabilization, property risk remains a significant concern for a variety of reasons.
Natural catastrophes, including hurricanes and wildfires, continue to pose a threat to businesses globally. In the U.S. alone, 2024 witnessed 24 disaster events, each resulting in damages exceeding $1 billion. From wildfires in Chile to floods in Hungary and global cyclone activity, these events highlight the ongoing impact of natural disasters on multinational operations.
“The primary challenge lies in understanding the potential business interruption impact resulting from supply chain disruptions,” Sansone explains. “If a piece of equipment manufactured is damaged, the key considerations are the time required to replace it and whether the cost will be higher. These types of impacts persist, indicating that the risks are still present, albeit with varying degrees of severity.”
Geopolitical events, such as the ongoing Russia-Ukraine conflict, and inflationary pressures also contribute to a challenging business atmosphere.
Key Benefits of Multinational Property Programs
A core objective of a multinational property program is to help organizations manage growing property risks across their global operations. Creating and maintaining such a program represents a significant undertaking, but ultimately, these programs offer a comprehensive overview and enhance risk mitigation.
“A global program provides a standardized approach to risk management, ensuring consistency across all operations,” says Sansone.
This standardization promotes centralized data collection and analysis, leading to more effective risk assessments and an improved decision-making process. Furthermore, multinational property programs can improve cost efficiency through the leverage of global purchasing power and the reduction of redundancies.
The Value of Local Expertise
Multinational property programs often rely on the expertise of local insurers in each country to issue policies, with the multinational company retaining the core risks.
“This structure allows companies to comply with local regulations while maintaining control over their global risk strategy,” says Sansone.
Fronting partners utilize local insurance expertise to navigate regional risks and understand the regulatory landscape.
“This is crucial for tailoring coverage,” says Sansone. Local expertise also facilitates faster claims resolution due to the familiarity with stakeholders in each region.
“Having a network with local expertise is crucial in providing valuable information to our clients.”
Building Effective Collaboration for Risk Management
Implementing a global property program requires careful consideration of the insurance team’s composition. A strong insurer offers not only comprehensive cross-border risk management knowledge but also an internal network that works closely with the multinational.
“Effective collaboration between a carrier and an insured involves more than just the underwriter and the client; it also means involving claims and risk engineering teams as well,” Sansone explains.
Risk engineers play a key role in supporting clients in order to help them become better risks. Multinationals can gain insights into mitigation strategies and lower potential costs by incorporating these professionals.
“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 says. “But if an engineer informs us about risk mitigation measures like sprinklers and shut-off valves, the potential charges will be lower.”
Access to the claims team is essential for effective collaboration. Being familiar with the claims team allows an insured to make inquiries regarding previous claims or to bring up matters raised by upper management.
“Providing them with a point of contact for future questions is invaluable,” Sansone says.
At AXA XL, the focus is on providing clients with tailored coverage that meets their specific needs and circumstances.
“Clients are increasingly asking questions and seeking advice on their property insurance and risk management strategies,” Sansone says. “We leverage our local market knowledge and expertise to provide better risk assessments and management tailored to our clients’ specific regional needs.”
AXA XL has launched a Multinational Solutions Portal for its clients. The portal provides centralized management of global insurance programs to streamline administration and reporting.
“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 explains.
“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,” Sansone said.“ 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.”
Ultimately, AXA XL’s multinational solutions aim to provide clients with a sense of security while navigating the intricate global market landscape.
“We do all of this so that our multinational clients have the utmost confidence in their insurance coverage and global risk mitigation strategy,” she says.
To learn more, visit: AXA XL Multinational Solutions
