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LONDON--(BUSINESS WIRE)--ACE today urged risk managers at multinational European companies to re-examine the capabilities of their global insurance partners as the international regulatory and business environment grows increasingly complex.

The recommendation follows recent ACE research, which suggests that 70% of European risk managers have increased their use of captive insurance arrangements over the past three years to help manage their multinational risks¹.

The report, “Structuring multinational insurance programmes – anticipating emerging global challenges for captives”, was released during the European Captive Forum in Luxembourg and is authored by Suresh Krishnan, Executive Vice President, Global Accounts at ACE; Suneeti Kaushal, Insurance Manager at Ikano Insurance Advisory; and Rémy Massol, Director of Multinational Services for Continental Europe at ACE.

The report sets out key themes for captive owners to consider when implementing a multinational insurance programme, including:

• Prioritise transparency of documentation and cash flow

The emergence of a complex array of rules in the diverse markets in which global companies operate – including rules concerning local policy issuance, ‘premium withheld’ obligations, and local currency export restrictions – means that captive owners increasingly need to seek insurance partners who will work with them to build multinational insurance programmes that comply with local requirements.

• Evaluate the implications of increasing international scrutiny of tax, capital, and solvency issues

European captive owners should be aware of, and ensure that they work with, an insurance partner who understands the potentially significant increase in the capital and compliance requirements imposed on them by developments such as US FATCA legislation, the emergence of gross reserving requirements in certain markets, and the uncertainty posed by Solvency II.

• Ensure that the ability to value, adjust, and pay increasingly complex claims across borders is incorporated within the multinational insurance programme

European risk managers are experiencing more claims outside their home market, according to ACE’s research². To manage this increase, it is imperative that they work with insurance partners who can help them to deliver transparency in surveying, valuing, and paying multinational insurance claims, along with transparent and timely loss reporting.

• Understand the implications of a multinational insurance programme on captive credit exposure and ensure that they discuss credit risk fully with their global insurance partner

Changes in a company’s international exposures, coupled with the potential impact of Solvency II on the capital-adequacy requirements for European captives, could cause insurance partners to re-examine a “no-collateral” reinsurance programme. The implications of credit risk should therefore be thoroughly discussed before a multinational insurance programme is implemented.

Suresh Krishnan, Executive Vice President, Global Accounts at ACE said:

“Financial strength, underwriting acumen and price are important criteria for captive owners when choosing a global insurance partner. In today’s complex international regulatory and operating environment, the requirement for best-in-class service and use of leading-edge technology to effectively manage programme performance should also be given due consideration.

“Transparent claims-service standards that are agreed before the programme is bound; metrics that objectively measure the performance of local premium payments and local policy issuance; a clear credit-risk methodology; and broad breadth in compliance know-how, are all equally important aspects of an insurer’s global capability and, ultimately, of a successful captive insurance programme.”

Suneeti Kaushal, Insurance Manager at Ikano Insurance Advisory, said:

“As clients, we want to work with insurers who are value-adding partners; partners who will critically examine our assumptions, and who will work with us to inform and navigate the complex, but varied, regulatory and compliance demands of each country in which we operate.

“Captive owners and managers should insist on an insurer-partner who has the information owners require to make properly considered decisions about the structure of their multinational insurance programme, and who will explore with them potential scenarios and stress-tests to establish how their multinational insurance programme will respond to particular claims situations. It is important to work through the difficult questions with the insurer-partner at the beginning; agree on service standards and guidelines; establish clear communication channels and the means to access information, all long before the inevitable claims-event that will test the integrity of a multinational insurance programme.”

For more information, and to download the report, go to: http://www.acegroup.com/eu-en/assets/2014-11_captive_report.pdf

ENDS

About ACE:

ACE Group is one of the world’s largest multiline property and casualty insurers. With operations in 54 countries, ACE provides commercial and personal property and casualty insurance, personal accident and supplemental health insurance, reinsurance and life insurance to a diverse group of clients. ACE Limited, the parent company of the ACE Group, is listed on the New York Stock Exchange (NYSE:ACE) and is a component of the S&P 500 index.

Visit www.acegroup.com/eu

¹ ACE European Risk Briefing, ‘Changing Multinational Risks and Evolving Solutions’, September 2014

² Ibid.

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