Tag: international insurance

As with purely national insurance solutions, international programmes also begin with an intensive examination of the risk. This is the basis for the risk financing strategy, from which the insurance principles are derived.

Specialised knowledge is required for the correct design of insurance programmes. It is important to know local regulations and special features. GrECo is in constant exchange with international partners and accesses databases to take all current trends and country specifics into account when designing contracts. This makes consultancy challenging, not least because the circumstances are developing dynamically.

HÖH: India will be the most populous country in the world. India has, arguably, greater linguistic diversity than any other large country. The precise number of languages spoken in India is probably over 1,000, but it is often hard to define when one language begins and another ends. How does this affect business? How do you cope with this varieties?

THAKKER: Well, the number of spoken languages, regional, folk etc. is said to be over 3000. However, we have Hindi as a national language which is taught in almost every school. Also, most schools in major cities and towns are English medium schools where Hindi is taught as a language, but overall teaching is in English. Most legal documents including insurance policies are printed in English. Language has never been a barrier in growth. In fact, India has become a huge IT hub because of a very large, young English-speaking population.

HÖH: What are the biggest risks that foreign companies operating in India need to be aware of?

THAKKER: So far, the major risk has been frequent policy changes in various sectors but that seems to have changed. The government seems to have adopted long term goals and have set up policies accordingly. Sometimes, infrastructure projects get affected when there is a difference opinion between state and central government.

HÖH: How do India risks differ from those in other countries?

THAKKER: Infrastructure is not at the same level as in Europe, the US or even China. That can be a “challenge” or a risk at some point. I would say the other “challenge,” which is not so much a risk, is that we have different states with very different cultures, different languages, and different consumer behaviour. That can be an extraordinary situation for companies that want to be present throughout India.

HÖH: What regulatory challenges are companies facing? What types of insurance are mandatory?

THAKKER: The current government is very industry friendly. A lot of new Economic reforms have been introduced and the latest budget presented on February 1st has been very well received. Non admitted cover is prohibited but some multi-national companies still rely on the master policy for D&O cover with no local policy. This can be a big issue and it is mandatory for stock listed companies to have a local D&O coverage in place. Other mandatory coverages include MTPL and a public liability act policy when storing or manufacturing certain, specified hazardous materials. The “cash before cover” law presents a challenge when it comes to global programmes as we often receive invoices / quotes very late and sometimes after renewal.

HÖH: How do you cope with these regulatory issues?

THAKKER: It is a standard practice for us to keep our partners updated with developments in India, be it regulatory or market practices. To cope with cash before cover issues, we keep regular contact with the local fronting company and global brokers well before renewals. Wherever possible (if accepted by the local fronting company) we advise the client to place deposit money, if invoices / quotes have not been received.

HÖH: Can international insurance programmes be implemented? Which special features must be considered?

THAKKER: Programmes can be implemented, all lines. Recent development however is that on PDBI local tariff rates will apply even on programme policies´. One must always remember that India has cash before cover law and that Indian clients are used to low deductibles. In general, local deductibles are much lower than programme policies for almost all lines. We closely interact with controlling brokers particularly on scope of cover. Generally, our observation is that when submitting terms to master insurers, local fronting companies often submit narrower terms.

HÖH: Please describe Peraj incoming business servicing capabilities?

THAKKER: Peraj has been in international business since 1978. We take extreme care to have a diplomatic and delicate approach with clients. We endeavour to spend time and efforts on confidence building with clients. More so when programme policies are to be implemented when local terms appear better. We try to engage clients in conversation, answer all their questions and allay all their fears and apprehensions. Generally, when the appointment is from HQ, the local client tends to get apprehensive. We give them comfort and confidence that we are by their side, to take care of all their issues. The entire team speaks fluent English in addition to local regional languages.

HÖH: Can you tell us about your most complicated case when dealing with international clients?

THAKKER: A large cement producer was setting up a very big and complicated project in this region. The quarry was being set up in the North East border of India and the cement plant was to be erected in Bangladesh, the two to be connected with a closed conveyor belt, 17 km long (longest in the world) crossing the international border and a river. North East was and is still a troubled state with Naxalite activities (insurgency group). The Bangladesh market was too small to be able to write a risk of the size the client was proposing (in fact the entire capacity was just about 5% of the requirement). Owing to challenges mentioned above, international reinsurers were unwilling to write lead terms and we had to arrange most of the capacity from India. The leading broker assigned us the task of placing the risk locally. The year was 1996 and we managed to do what was necessary. This client is still with Peraj although globally brokers have kept changing.

Tushar Thakker
Tushar Thakker is the owner of Peraj insurance broker and leads the broker as CEO and Director for more than 30 years. He is well known in the global risk management community and has strong relations to brokers around the world.

About Peraj
Peraj is the oldest intermediary services company in India for direct/retail broker related services. Peraj is a pioneer with 65 years’ experience in the industry. A very high client retention rate reflects the quality of services and the ability to service all lines of insurance. Peraj provides services not just across India but also Nepal and Bangladesh.

HÖH: What role does foreign direct investment play in the Japanese economy?

WALLINGTON: By way of background, Japan has had less foreign investment when compared with most of the other major developed nations. This is mainly because for a long time, they have sought to nurture and protect their own companies until they were strong enough to trade and compete in the global markets. In some cases, foreign companies have entered the market and then withdrawn once they found the barriers too difficult to manage. For example, eBay Inc who entered the Japanese market in 1999 but had to withdraw in 2002 due to local competition. Fortunately, the situation has recently changed and foreign investment in certain industries is now rapidly increasing.

Japan is potentially a very attractive market for many overseas companies because it has a very large and sophisticated customer base of over 120 million and represents approximately 10% of the world’s economy. However, it is a tough market to break into because Japanese customers can be very demanding, with different tastes and needs requiring overseas companies to redesign or redevelop their products. Examples of this in the past have included cars, mobile phones and toothbrushes.

HÖH: What are the biggest risks that foreign companies operating in Japan need to be aware of?

WALLINGTON: The size of the market requires substantial investment and there is usually fierce competition from long established competitors (depending on the products and industry). A detailed market research and strategy is an absolute necessity to succeed in this country.

In addition, Japan has always been a very bureaucratic country with lots of regulations, permissions, certifications, procedures, offices and authorities requiring approval procedures. These don’t normally exist to such an extent in most developed countries and it requires a lot of patience to navigate through these.

On the physical risk side, Japan is reported to have around 5,000 minor earthquakes recorded per year (more than half measure between 3.0 and 3.9) and around 160 earthquakes with a magnitude of 5 or higher. Having said that, the building construction regulations are such that most of the infrastructure can withstand all but very strong earthquakes. Other natural perils such as flood, typhoons and windstorms are becoming more regular and stronger as climate changes make their presence felt.

HÖH: What are the main facts of the insurance market in Japan? How do the key indicators compare to European markets like the German insurance market?

WALLINGTON: The Gross Written Premiums of 114,818 million USD in Japan are rather low compared to 126,005 million USD in Germany. This clearly indicates that the Japanese insurance buyers do not purchase as much insurance as these other countries, in particular business interruption insurance.

The major lines of insurance include Motor (40.2%), Liability (19.6%), Property/Commercial (18.4%), Marine (4.7%) and Other (17.1%).

Additionally, the market share of the top big 3 Japanese insurers represents 86% of the Japanese premium, indicate a strong concentration and power base in these 3 insurers.

The largest Claims in FY 2018-2019 were natural disasters including eight typhoons totalling 29.3 billion USD/ snowfall 3 billion USD / heavy rain 1.8 billion USD although this is somewhat less than major earthquakes such as the Tohoku earthquake in 2011 which resulted in 15,782 killed/4,086 still missing/128,530 dwellings destroyed & losses totalled 236 billion USD.

HÖH: Can international insurance programmes be implemented? Which special features must be considered?

WALLINGTON: There are literally thousands of International Programmes in place in Japan through fronting policies for foreign companies operating in Japan. As non-admitted insurances in Japan are illegal (apart from marine, aviation, reinsurance and overseas travel), companies must have their global insurers/brokers arrange for fronting policies to be issued by either their licensed subsidiary in Japan and if they have none, then by a correspondent licensed insurer/broker.

Additionally, when purchasing insurance in Japan it should be noted that the Insurance Policy Wordings need to be first approved by Japanese FSA. In addition, the collection of insurance premiums is critical as Japan is a “cash before cover” jurisdiction and the fronting policies are only effective once the premium is paid to the insurance agency such as Cornes. Insurance premiums need to be paid by a policyholder who resides in Japan in Japanese yen and not from overseas parent companies.

Policy wordings are available in Japanese or English depending on the type of insurance and the insurer. The compliance laws in Japan require insurance agents to explain each type of insurance and get the local subsidiary’s ‘sign off’ that they understand and agree to the renewal terms even when the terms are agreed by their head office.

HÖH: What are the first steps for foreign clients regarding insurance?

WALLINGTON: Once, we at Cornes, are advised of a new client and the fronting policy(ies), we introduce ourselves to the local subsidiary’s contact and the fronting insurer(s). We then re-confirm the terms, run through the insurances with the local client representative (as required under Japanese law), raise an invoice and issue the application forms (one required for each policy every year). Japan is a “cash before cover” jurisdiction so cover commences only once we, acting as the insurer’s agent, receive the premium. Every application form requires the client’s registered “hanko” (stamp) and insurers will only accept the originals of these forms before issuing the policy documents although the pandemic and WHF restrictions has meant that some insurers accept copies for the time being.

Cornes Insurance Agency prides itself on its professionalism and we have established a comprehensive servicing and follow-up system in place to ensure we give every client a friendly and professional service. Our incoming business service capabilities are our lifeblood and we insist that all account managers have a minimum level of English. In addition, we currently have two persons who can also speak and write Spanish and one who can write and speak German.

Our insurance license enables us to not only manage the client’s general and financial risk insurances but also assist them with their Employee Benefit insurance needs – two of our account managers used to work for Japanese Life Insurance companies. All account managers are required to pass the Japanese Insurance Agency exams before being allowed manage clients. In terms of our international business experience, we have an average of 10 years per account manager.

As in some other post-Soviet economies, insurance spending in % of GDP remains quite low, also impacted by constraints in macro-economic conditions, restricted bank lending, and currency devaluation. This results in market premium primarily depending on the compulsory classes of property and MTPL, supplemented by voluntary premiums across all classes related to the major corporate businesses in the oil, gas, energy, real estate and construction sectors.

However, usually local market capacity is not enough to cover large corporate risks of foreign direct investors. Additionally, the wordings do not match the standard of Western European countries and regulatory complications, such as the required filing of forms with authorities, make local market placements difficult or impossible. Therefore, brokers advising multinationals with business interests in Eurasia try to organize global coverage.