2:15 - 3:15 pm
Global Opportunities: Breaking through the Barriers
Moderator: Marilyn Ostermiller, Managing Director, A.M. Best



Stick With Company Strategy in Global Deals, Expert Advises Insurers seeking to expand globally too often react to individual deals rather than pursuing targets meeting their strategic goals, a British industry expert warned at A.M. Best Co.'s 10th Annual Insurance Information Services Conference in Washington, D.C.

Terrence G. Clarke, a London-based consulting actuary for Tillinghast-Towers Perrin, speaking Monday said, "In Europe, my experience has shown there's often blood on the table as a result of these deals."

His remarks came at a panel discussion titled Global Opportunities: Breaking Through the Barriers. One of the biggest problems, Clarke said, is inattention to the very real cultural differences between organizations in different countries. "It's dangerous just to enforce your own culture onto the new venture," he said.

Clarke also highlighted steps companies should take in deciding whether to expand overseas, which included, among other things, identifying its own strategy, identifying criteria for a target company. Other steps in the process of going global include understanding the numbers and due diligence, in some cases making sure that the assets to which you are attempting to assign value are real. "They are not always there," Clarke said.

Despite nearly daily reports of insurers establishing new international ventures, insurers lag far behind other industries in the trend toward globalization, said Nick Pearson, a partner in the insurance and reinsurance practice at the law firm of Edwards & Angell. While reinsurance certainly involves the international flow of funds and risk transfer, global reinsurance premium, at less than $100 billion worldwide, represents only a modest portion of worldwide insurance premium, which is about $1.5 trillion.

The major stumbling block preventing cost effective opportunities for national insurers to expand internationally is the old-style protectionism still in place in so many countries, he said.

Yet notable loosening of protectionist laws in Brazil and reductions in international barriers in the European Community provide reason for hope. Brazil has become one of the world's fastest growing insurance markets, with four deals between foreign and local companies in 1995, eight in 1996, and 14 so far this year, Pearson said.

What is necessary, however, is a general worldwide adoption of free market principals, and Pearson advocated that the United Nations is the best vehicle for the international "harmonization of regulation."

"As urged by the Parker Proposal, the U.N., working with national insurance supervisors, the insurance industry, and consumer representatives could collect and analyze regional and national regulatory schemes and ultimately make recommendations for implementation of more rational and open national regulation," Pearson said.

Lack of uniformity in regulation is one of the attractions the insurance industry has for international con artists, according to panelist James H. Vaules, director of government relations for Trans Union National Fraud Center.

As a former FBI supervisor who oversaw white-collar and violent crime investigations, Vaules saw the evolution of fraud from off-shore banks to off-shore reinsurance. The appeal was clear: an 8-to-1 return on a fraudulent asset with rare regulatory oversight or attention from law enforcement.

In most cases, he said, the same networks of con artists move from one scheme to another--shifting operations as their schemes collapse. Almost always, the cons boast international connections and the ability to raise venture capital--but their claims can rarely be confirmed. The best way to avoid being scammed is careful due diligence. "If you can't get a good banking reference from a reputable bank," Vaules said, "chances are you have a problem."