Multinational insurance programs are taking off, says AIG’s Tony McHarg By John Deex
BEFORE GETTING INTO insurance, Tony McHarg was a qualified commercial pilot. But it wasn’t for him, and having pressed the eject button decades ago he’s now flying high leading AIG’s multinational business in the Asia-Pacific region.
There’s nowhere he’d rather be, he says. The sector is experiencing rapid growth and is packed with opportunity, investment and innovation.
There are four key components to the multinational sector: program design, implementation and management; service delivery; global fronting (where policy issuance and service is provided on behalf of third parties); and captive management.
“It’s around meeting multinational clients’ risk governance and contract certainty needs, and in a seamless, globally consistent manner,” Mr McHarg tells Insurance News. “That’s really the element that multinational brings on top of an indigenous business that has the same desires. What sits behind that in terms of whether it’s insured, risk transfer, or whether it’s reinsured to a third party with global fronting, comes down to the maturity and circumstances of the client.”
It can be an incredibly complex area, he says, with no one right way to design a program. Multinational businesses have many alternatives, including fragmented purchase of local policies, global policies or a combination of the two under a controlled master program.
“First and foremost it’s about working through that consultative process with broker and client,” Mr McHarg says. “Second is recognising that
multinational tax and regulation is fluid.”
Even within the Asia-Pacific region, regulations can evolve rapidly during the life of an insurance program, meaning multinational programs are never “set and forget”.
“The biggest lesson that I get every week is about communication and collaboration,” Mr McHarg says. “You are talking about aligning our insured’s head office with their overseas locations, a broker with their overseas locations, and AIG with our offices, and ensuring all of those parties are in sync.”
A multinational program has several key advantages over fragmented local purchases, which Mr McHarg sums up as “the seven Cs”.
1. Control. “You have visibility of the insurance that is in place, control over the insurance that is taken out.”
2. Compliance. “There are challenges around regulatory and tax compliance. With a multinational program with a multinational insurer you are able to get those insights and have a greater degree of confidence
that you’ve done what you can as a corporate entity to adhere to those rules.”
3. Co-ordination. “It makes it easier for an insurance and risk manager to respond to questions around coverage in force when they have access to the AIG multinational portal and can see all of those policies and invoices and due dates as and when they require.”
4. Cost. “We have to make sure we don’t compare a multinational
program with just the aggregate of local policies. Quite often the coverage is different, the limits at the master policy level are different. We need to look at cost in terms of total cost of risk and the efficiency in terms of administration.”
5 & 6. Consistency and certainty. “Consistency in terms of coverage brings a greater degree of certainty that the overall corporation is protected to a level set out in the master policy.”
7. Claims. “A fragmented approach to buying insurance gives relationships with different local insurers that may have varying levels of competency
and capacity to respond to insurance loss, particularly in the event of a major catastrophe.
One of the things we take pride in is that we are able to shift claims resources around to ensure that when local markets may be overwhelmed, we are able to support our multinational clients.”
And the message appears to be getting through. AIG’s multinational sector has achieved strong growth on an ongoing basis over the past
Mr McHarg expects Asia- Pacific to continue achieving growth of 8-10%, both in terms of the number of programs implemented and the number
of local policies serviced.
“We are seeing strong growth in multinational – globally across our portfolio it remains a core competency and a core growth strategy for AIG, and we are investing accordingly,” he says. “It’s underpinned
by growth in every region and our forecasts are to continue to see growth in both produced programs, the number of policies we service as well as the clients we serve on a fronting basis and any captive management consultancy.”
Increasing globalisation is among the trends driving this growth.
“It’s not only about being in search of new market, it’s about a search for efficiency in terms of lower-cost suppliers, it’s to follow clients or customers who are moving overseas. Australia’s location and trade with Asia means, more commonly than not, it’s expansion into Asia. European businesses are looking to Asia as well in terms of balancing their business.”
It is no surprise, then, that AIG is keen to invest further. A major project to automate program design and execution “to a level not seen before” is under way.
“AIG is continuing to invest in process, people and technology that will support more multinational clients in the future,” Mr McHarg says. “We have a very clear multiyear, multimillion-dollar investment that has seen us roll out what we think will be a market-reshaping end-to-end process globally, so every one of our multinational programs adheres to the same consistent process. We believe that will set us apart. We want to grow our portfolio, we want to extend the service capabilities we provide across more lines of business and services.
“Ten years ago multinational programs were predominantly the remit of large multinational companies in 10, 20, 30 or more countries. They are still very important clients for us. But the vast majority of multinational businesses in Australia and worldwide fall below that threshold and operate in two, three or five countries.
“Making it easier for those businesses to transition from fragmented local purchases to a more considered program is one of the objectives we have.”
Mr McHarg does not believe the complexity of the multinational segment makes it immune from disruption – far from it.
“Market conditions are very challenging and you can no longer rely on the same ratios and returns as historically throughout my career we have
been able to,” he says. “So we have to do things differently.
“We have to make hard choices in terms of how we set up, we have to make big investments in terms of the future, and companies such as AIG are doing that. We are working to create opportunities to innovate, and we see partnering as important to that.
“We feel in no way insulated from the potential to be disrupted or immune from the need to be innovative. Evolving is way too passive a word. We have a clear mantra at AIG – execution at pace.
“We want to be in control of our ability to deliver value and to outpace the general market.”
Mr McHarg has no regrets about bailing on his career as a pilot – but he still harks back to some of his training. One key lesson that has stayed with him is the importance of going through checklists.
“You may do it every day, but you can’t take anything for granted.
“Multinationals are very much like that. It works well when you do everything in sequence – when the insurer, the broker and the client all
understand what needs to happen when.”
Another important lesson is not getting so bogged down in technical details that you lose sight of where you are.
“In the cockpit, there are instruments above you, instruments to the side of you, instruments behind you,” he says. “There’s an enormous
amount to look at. But they also put a window there so you can look outside. The instruments tell you what’s happened, but it’s very important to keep an external scan, to understand the terrain you are
flying through. With insurance, I am constantly reminded to engage with
our clients, and our brokers.”
Ultimately, he’s happy with his career choice.
“Insurance is far more exciting. A pilot sits in the same chair every day and looks at the same instruments. Insurance has been a terrific
opportunity to be involved in all sorts of businesses, and the multinational space is never short of challenge or interest.”