Mark Sanders, Divisional Executive of Corporate Internal Broking at GIB Insurance, warns that amidst a plethora of global crises, ranging from natural disasters to overseas conflicts, multinational corporations may be overlooking the importance of robust international insurance coverage. Sanders emphasizes that many businesses realize the consequences of lacking global coverage only after it’s too late, as unforeseen global disasters can strike suddenly, leaving companies vulnerable to financial losses and operational disruptions.
Sanders attributes these vulnerabilities not only to inadequate insurance policies but also to non-compliance with local insurance regulations. He underscores that such non-compliance can lead to significant 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 advocates for the implementation of standalone master policies to manage global insurance risks effectively. He suggests that having such master policies covering all insurance line risks on a global scale, rather than a disjointed array of policies and programs, ensures comprehensive coverage under a unified policy wording. Sanders emphasizes the importance of strategically structuring these master policies to address potential risks identified in each territory worldwide for each line of insurance.
This approach minimizes the risk of inadequate policy wordings in specific territories and ensures that companies are fully aware of their coverage exclusions or have measures in place to address them through risk mitigation, disaster planning, and self-insurance.
Sanders highlights the common refrain in the insurance industry, “We thought it was covered,” stressing that the most effective and economical way to address this is through a global approach to insurance programs. He concludes by emphasizing the necessity of having the right coverage in place, which requires the knowledge, expertise, and connections of experienced insurance professionals.