As part of its expansion into direct-selling insurance to the global company marketplace, Swiss Re has partnered with Royal Sun Alliance (RSA) to offer single carrier property insurance to mid and upper-middle size U.S. companies with worldwide operations.
This new partnership will be managed by Swiss Re’s Corporate Solutions team, which was formed to handle all of Swiss Re’s insurance-related offerings. The global reinsurer formalized its operations into three business groups back in October 2010 – Corporate Solutions, Reinsurance and Admin Re – to give it a holding company structure.
Jamie Miller, head of North America Property for Swiss Re, in New York, N.Y., says the RSA partnership is part of Swiss Re Corporate Solutions’ push to become a “lean global player.”
Miller says Corporate Solutions was restricted from working with bigger companies with foreign exposures when it started the new business group almost two years ago in situations where it didn’t have a location in the country the client company had operations in or was expanding to.
“We don’t have a global infrastructure even though we are global company, so we don’t have a local presence for the legal and admitted regulatory requirements,” says Miller. “You have to have a physical presence [in the country] to issue a policy.”
He says maintaining a 150+ country infrastructure would be a huge expense that the insurer is not planning to undertake.
By partnering with RSA, the insurer said it can work with U.S. companies that operate in countries where Swiss Re does not have offices.
“Our appetite is pretty strong so we wanted to do the bigger companies with foreign exposures and this allows us to do that,” says Miller.
The partnership works through what is called third-party fronting. Swiss Re does all the underwriting of the policy and RSA handles the local admitted requirements. The policy is on Swiss Re paper in the U.S. and Canada and on RSA paper in the other country or countries. If Swiss Re has an office in that country, the policy would be on Swiss Re paper.
“[RSA is] dealing with taxes, coverage requirements, limit restrictions –– global fronting is very complex and that’s why you don’t see 20 different companies doing it,” he says. “You need people who are experts on policy and coverage and local regulatory issues.”
With fronting, Miller says, clients have a global master policy that fills the local coverage gaps and are saved from having to spend a lot on local insurance. Each policy is tailored to what the client needs in that country with 100 percent, single-carrier property coverage and limits up to $200 million internationally.
Single-carrier property coverage means the insured has one team from premium to claims handling for the entire policy, including catastrophe perils.
“Some companies would just issue U.S. paper for the U.S. exposures and then get an independent policy in the other country but the danger is inconsistency,” says Miller.
Swiss Re Corporate Solutions is providing property coverage only right now, including physical property, economic income, buildings, contents, machinery, and physical assets, as well as business interruption/business income. It is targeting service companies, manufacturing, retail and real estate segments with $250 million to $2 billion in sales.
Miller says in the past these policies were directed towards larger corporations, but globalization and the Internet have changed that.
“In today’s economy, the company could be relatively small but their product is made overseas so they have some exposure they need to insure,” says Miller. “We want to grow this upper middle-market space; and for a lot of these clients, as they grow, they are looking to expand into other countries.”
Swiss Re’s Corporate Solutions’ biggest challenge since its launching, says Miller, was its ability to handle business in foreign countries and the partnership with RSA has now taken care of that. “Our biggest challenge now is getting people comfortable with Swiss Re doing this [direct insurance] business,” says Miller. “Part of this reach for us is making people aware that we are a valuable player in the middle-market space.”