With the myriad of crises and challenges taking place around the world, from natural disasters to wars and conflicts abroad, multinationals may not be playing it safe enough when it comes to insuring against international risk, says Mark Sanders, Divisional Executive | Head: Corporate Internal Broking at GIB Insurance.

“Many businesses realise too late that forgoing global cover can have many unforeseen drawbacks. Global disasters often strike without warning, leaving businesses that have assumed they have the right cover vulnerable to loss and other business disruptions,” says Sanders.

Inadequate insurance policies are often to blame for these vulnerabilities, but non-compliance with local insurance regulations are also a common factor. Sanders adds, can result in major penalties fines, sanctions, or legal actions imposed by regulatory authorities in the jurisdictions where the company operates.

Non-compliance may also result in companies losing their licences or permits to operate in certain markets, not to mention the reputational damages they will likely incur, and the possibility of rejected insurance claims altogether.

“In the current global climate of uncertainty and instability, it makes sense to engage insurance brokers with knowledge of the local regulatory environments and who form part of a global network, to mitigate some of these risks,” says Sanders. “It’s also necessary to regularly review and update insurance programmes to ensure a business’s cover aligns as much as possible with the changing regulatory landscapes.”

Comprehensive global cover should ideally cover a wide range of risks and potential liabilities to provide robust protection for individuals, businesses, and organisations operating internationally.

Food and beverage companies, for instance, would benefit from product liability insurance in the event of food contamination or outbreaks of foodborne illnesses such as salmonella or listeriosis. The same goes for a certain pharmaceutical brand that faced severe backlash following claims that the use of its product caused ovarian cancer and mesothelioma due to asbestos contamination.

Professional indemnity clauses are just as crucial in protecting against claims of negligence, errors, or omissions in the provision of professional services. A firm that provides financial advisory services to clients around the world, for example, would benefit from this immensely in the event a client brings a lawsuit against it who alleges that its financial advice led to substantial investment losses.

There are countless other areas that a sound global insurance policy would need to cover in order to mitigate the risk factors inherent in doing business on a global scale. Business interruption insurance (in the case of events like the recent floods in KwaZulu-Natal), political risk insurance (for losses resulting from political instability in one of a business’s territories), cyber insurance (protection against cyber threats such as data breaches), and even kidnap and ransom insurance are just a few examples of components that comprehensive global insurance may include.

Sanders adds that having standalone master policies that cater for each insurance line risk on a global scale, instead of a series of misaligned insurance policies and programmes, ensures that all these risks are insured on one base policy wording. “This should be strategically structured to address potential risks that have been identified in each of the territories worldwide, for each line of insurance.”

This, cuts out the chances of inadequate policy wordings being issued in certain territories and also ensures that a company is, at a minimum, aware of its cover exclusions, or that it has coarse to address these through the use of risk mitigation, disaster planning and self-insurance.

“‘We thought it was covered’ is a phrase we hear all too often in the insurance industry. The reality is that the only way to effectively and economically address this is to approach insurance programmes on a global basis. Having the right cover in place to mitigate risk and protect businesses against a wide range of calamities requires the knowledge, expertise, and connections of experienced insurance experts,” says Sanders.

Author: Mark Sanders | Divisional Executive | International