The August article touched on multiple ways companies can mitigate risks as they move from selling exclusively to domestic markets to supplying international markets (please see page 4 at www.cheesereporter.com/August112017.htm). We explored topics such as: foreign general and product liability, protecting your product in transit, and travel and accident insurance for employees.

With a global master program, leadership can feel certain that the foreign coverages are appropriate while not being duplicative.

It’s becoming more common for food processors to establish global operations rather than solely exporting their products. They either want to be closer to their customers and end-users, or closer to the raw ingredients sourced for their finished goods. Maintaining a competitive advantage in the dynamic global marketplace is a key driver in their foreign expansion.

Regardless of the compelling force behind the decision to expand, an underlying requirement in all foreign expansion efforts is proper and comprehensive insurance coverages for people, products, and property. And leaders must determine who will have authority over these decisions. Will they be made domestically at the US headquarters, or will this responsibility be placed in the hands of the foreign operations team?

While placing this authority exclusively in the hands of leadership in-market may seem to create efficiencies, it could also lead to challenges. For example, if the foreign operations are purchasing insurance coverages with no oversight or reporting mechanism back to the US-based headquarters, the US operation may be vulnerable to a number of unnecessary costs—and risks.

Additional challenges include:
• Gaps in coverage: When there is minimal oversight by the US headquarters, foreign operations may lack crucial coverages, such as adequate products liability coverage, employment practices liability, cyber liability or coverage for the parent company.

• Redundancies in coverage: umbrella, ocean cargo, directors and officers—these are typical examples of liability insurance that usually cover both domestic and foreign offices. In other words, your foreign offices may be purchasing these coverages unnecessarily and therefore duplicating efforts, leading to unnecessary costs.

• Higher premiums: When your foreign offices purchase insurance as individual entities, they don’t benefit from the economies that can come with being connected to the larger parent company’s policies and relationships.

• No reporting: Minimal oversight can lead to lack of awareness regarding losses incurred by the foreign operations. Late reporting of claims to your insurance carriers can lead to coverage and defense being denied.

• The quality of the local broker: Have the reputation and expertise of the foreign office brokers been vetted? Domestically, if a broker places insurance coverages with minimal or no understanding of the nuances of coverages for foodborne illnesses, the food processor may find they lack the adequate coverages for bacterial foodborne illnesses caused by such common pathogens as Listeria monocytogenes. Does the broker have the knowledge needed to provide appropriate advice and services to your international operations?

A common coverage solution for companies with international operations is a global master program. With a global master program, foreign operations still maintain control. They still have locally based brokers who represent them and know the local laws, pricing, exposures, coverage norms and market conditions.

Consider these advantages:
1. Two-way communication: The domestic insurance broker provides the local brokers a summary of coverages purchased at the corporate level that extend to all entities, domestic and foreign. This enables the local brokers to know exactly what your foreign offices need or don’t need to purchase.

2. Policies are tied together: When it’s possible and the costs are competitive, the foreign offices place their coverages with the same insurance company used domestically. By doing so, the foreign production facilities may discover they have access to more parent company coverage than they realized. And when redundancies are eliminated, money is saved. On top of that, the international operations are now purchasing insurance that reflects the economies that come with being part of, say, a $100 million company, rather than acting as individual entities that are worth much less. This also means your foreign offices can enjoy higher limits.

One consistent truth, regardless of the market where an international operation is located, is that exposed liabilities in foreign operation ultimately flow back to the US-based company. With a global master program, leadership can feel certain that the foreign coverages are appropriate while not being duplicative.

Additionally, the foreign operations benefit from having better information, as well as better pricing and service.

Jim Yeager is Partner, Vice President, Director of International Practice at M3 Insurance. M3 Insurance offers insight, advice and strategies to help clients manage risk, purchase insurance and provide employee benefits. The views expressed above do not necessarily reflect those of Cheese Reporter. You can contact the columnist by calling (800) 272-2443, or by visiting www.m3ins.com.

Jim Yeager

Jim Yeager is Partner, Vice President, Director of International Practice at M3 Insurance. M3 Insurance offers insight, advice and strategies to help clients manage risk, purchase insurance and provide employee benefits.
For more information, call (800) 272-2443 visit www.m3ins.com.

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