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Key risk considerations for companies expanding into new markets

Companies expanding into new markets should prioritise assessing their general liability, property, and workers compensation exposure, according to John Hills, multinational adviser at Marsh, speaking at the “Global Programmes — Europe 2024 conference” in London.
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By John Hills , 

Multinational Advisory Practice Leader

23/10/2024 · 3 minute read

Companies expanding into new markets should prioritise assessing their general liability, property, and workers compensation exposure, according to John Hills, multinational advisor at Marsh, speaking at the “Global Programmes — Europe 2024 conference” in London.

“Having a broker partner in the country can give you the comfort that the insurance arrangements in place, whether they form part of the global programme or are standalone policies that are sourced in country, are suitable for your company,” he said.

Having these covers in place gives you a good base, from which you can then start to consider other exposures such as professional indemnity, directors and officers, and auto.

When it comes to general liability exposure, companies should take into account the specific rules and regulations of the local market regarding general liability coverage. It is important to gauge how a global programme aligns with the requirements and standards of the local market.

On property exposure, even if you are renting a building, you may still bear responsibility to arrange suitable insurance. It is advisable to have a clear understanding of the specific requirements and coverage needed for your property, and any leases or contracts in place.

It is essential when entering a new country, especially one a company is unfamiliar with, to thoroughly understand the necessary workers compensation coverage required. Companies should make sure employees have the necessary cover from the outset. Failing to have the appropriate coverage in place can result in significant fines and reputational damage for the company.

Panellists suggested companies also consider the following in their target market:

  • Geopolitical risks, including the economic situation of the country, and how risks might evolve over the next 5-10 years.
  • Cyber and technological risks.
  • Mandatory coverages.
  • The availability of workforce and safety and health management practices.
  • The availability of the right vendor services in the event of an emergency.

Regarding mergers and acquisitions (M&A), it is common to encounter situations where an entity being acquired in another country already has a chief financial officer (CFO) and existing insurance coverage in place arranged in that market. However, it is important to assess whether this insurance is still suitable and fit for the purpose of the new organisation.

Financial interest clause “not fully explained”

The panellists also addressed challenges that can arise when insuring entities in different countries. Marsh's John Hills said that some subsidiaries have been led to beleive incorrectly that possible gaps in local coverage were covered by their master insurance programme.

A financial interest clause provides protection to a parent company against financial damage from a local subsidiary’s losses when the subsidiary cannot be directly insured by the global insurance company’s master policy. It can protect against tax and regulatory risk that may surface for subsidiaries covered under a global policy issued by an insurer that is not licensed in the subsidiary’s country.

“The financial interest clause has helped in certain situations, but it's not a solution for every local regulation you come across,” added Hills.

Global programmes expected to cover more “unique” risk

Overall, the panellists agreed the outlook for international expansion and global or controlled master programmes looks promising. With claims presence established worldwide and continuously expanding databases of information, coupled with AI tools to monitor regulatory changes across multiple countries, companies have the potential to maximise the benefits of a global programme.

Global programmes also provide a single point of contact, streamlined service, a unified approach for premium allocation, and tax management.

With insurance penetration worldwide growing at twice the rate of GDP, the risks covered by global insurance programmes are only expected to increase, according to Dawn Miller, Chief Commercial Officer and CEO of Lloyd’s Americas.

“At the end of the day, there is not enough state funding or subsidisation to deal with the flooding we're seeing, cyber issues, cloud downtime, and the list goes on,” she said.

“It is time to challenge ourselves to say how could you translate some of those more unique products into the multinational programme.” 

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John Hills

John Hills

Multinational Advisory Practice Leader

  • United Kingdom

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