Bob Mendelsohn, CEO of the U.K.’s Royal & Sun Alliance Group, in a recent interview with the Wall Street Transcript, described the advantages gained by being a global insurer.
Mendelsohn initially cited the ability to spread risks. “For us, there is a real capital advantage in being a global player because our risks are not geographically correlated.” Less capital is actually required to run a global business, than would be the case if each area were covered independently, said Mendelsohn.
The next advantage he noted was derived from economies of scale- “The ability to source the products and services you need to look after your clients on a global basis.” He pointed out that RSA frequently replaces goods rather than settling claims with cash. The company is “the third largest buyer of jewelry in the U.K., one of the largest buyers of televisions,” etc.
The ability to move knowledge around the world rapidly was the third advantage Mendelsohn gave. New products and services can be introduced from one area where they’ve proven to be successful to other regions. Underwriting knowledge and expertise is made available to all sectors of the company, which improves risk analysis.
“So in all three of those areas, the global player can bring something to the table that a purely regional player cannot,” Mendelsohn concluded.
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