“As brokers, we have to be on top of things all the time”

SPOTLIGHT: You have been working for an international insurance company for the last 20 years. In your opinion, how will international insurance programmes develop in the future?

SCHMITT: The current pandemic has certainly put a slight damper on globalisation. The question will be whether this damper will have a long-term effect. Therefore, it is not possible to give a general answer to this question, because the development of international insurance programmes depends heavily on the development of companies. In addition, the regulatory framework in individual countries is constantly changing, which makes it difficult to implement a truly international insurance programme.

SPOTLIGHT: What do you currently recommend when advising a client on this subject?

SCHMITT: It is important to deal intensively with the company: How and in which countries is the company positioned? What is the company’s culture, is it centrally or decentrally managed? What are the individual dependencies of the production locations? Who and where are the company’s customers? We then jointly analyse the operational risk. To this end, we draw on the expertise of our risk specialists, among others. Thereafter we check which of these operational risks can be insured, develop an insurance philosophy together with the client and only then can we make a recommendation. In the end, this can be a fully integrated insurance programme, an internationally coordinated insurance programme, a mixture of both, or local solutions in the respective countries. The added value for the client ultimately defines the solution.

SPOTLIGHT: What exactly are the differences?

SCHMITT: With local solutions, each country takes care of its own insurance coverage. The advantage of this is that local management usually has a high level of acceptance because local, individual wishes and requirements can usually be implemented. These wishes and requirements are actually not relevant for the group of companies and are therefore often not included in the international insurance programme. The disadvantage is that each country does what it wants, which makes it difficult to achieve a uniform safety standard in the group of companies. The costs for the group of companies are often many times higher in total, since, for example, the insurance sums have to be made available per country.

In the integrated programme, on the other hand, insurance is managed and purchased centrally by the Group. Where necessary, local insurance policies are installed. The disadvantage: a limited insurance market. The advantage: a uniform security concept and often lower insurance costs overall.

The internationally coordinated insurance programme and the mixed form (e.g. Europe in an integrated programme, the remaining countries with local, so-called non-program policies) attempt to combine the advantages of the two above-mentioned forms, but have the disadvantage that they are rather more administration-intensive.
However, these are only rough indications, there are many more advantages and disadvantages. To know which is the appropriate way always depends – as mentioned earlier – on the company and its positioning, philosophy, etc. Basically we are talking about the decision centrally (fully integrated insurance programme) versus decentrally (no insurance programme).

SPOTLIGHT: Why might it make sense to insure certain risks in one country separately and thus outside the insurance programme?

SCHMITT: Every insurer has a different underwriting policy, i.e. what kind of risks they want to insure and what kind of risks they don’t. Sometimes it even happens that within an insurance group the individual national companies act differently in this respect. An example: Insurance company XY in Austria does not insure a foundry, whereas the sister company in Bulgaria does because it has had positive local experience with it.

SPOTLIGHT: Does the respective market phase of the country also play a role?

SCHMITT: Definitely. Take a current look at Eastern Europe. This market is far from being as well developed as Germany and Austria, for example. It may well be that a local risk is sometimes insured more cheaply than in Austria or Germany – although it must be said that the internationalisation of insurers counteracts this, because that is exactly what the large insurance groups are trying to avoid. It will be exciting to observe this. As risk and insurance managers, we have to keep our eyes on top of things in order to get the best out of it for our clients.