Driving communication and consistency in international programs

Clear communication lies at the heart of ensuring your international program provides consistent cover. It will give you the confidence that master policy clauses offering difference in conditions (DIC), difference in limits (DIL) and financial interest cover (FINC) will respond as needed. 

When called upon, DIC, DIL and FINC clauses can have a significant impact on the total indemnity received following a loss. Here are two real-world examples which highlight the difference these policies could make for your business.

A leisure group opened a new hotel abroad which then suffered a major property loss because of a typhoon. 

The local policy was limited and didn’t include cover for green spaces and landscaping. This meant it didn’t cover the damage to the hotel’s gardens. It also provided cash value cover and not full replacement value, again limiting the local settlement to the hotel. 

Finally, local regulation stated that business interruption cover was only applicable to facilities that had been in operation for at least 12 months. In this case, the hotel had been open for fewer than 10 months and so business interruption cover was excluded from the local policy settlement. 

However, in the master policy there was no time limit excluding business interruption cover. It also offered wider wording for the property damage that included the gardens and paid based on full replacement value. The overall loss suffered by the hotel ran to millions of dollars – three-quarters of the total paid was picked up by DIC cover from the master policy. 

In the second example, an appliance manufacturer suffered a fire loss in a production facility abroad. It took months to clean, repair and reinstall operations. The claim was submitted locally, and the insurer paid out a settlement that ran to millions of dollars. 

However, the way that the claim was adjusted (in this case the date of the impairment) was different under the master and local policies. The local policy had a much longer waiting period until the payment could kick in, but this was significantly shorter on the master policy. 

So, in addition to a strong local policy, the owners of the facility were able to secure an additional payment (in this case a FINC claim as the local country didn’t allow DIC/DIL) running into the millions. 

These two examples show the value of DIC, DIL and FINC cover in providing additional indemnity to that offered by local policies in the event of a loss.  

Creating consistent cover on a worldwide basis is an ongoing challenge that will take time to deliver. To advance the market further in this direction, we’ve developed a standardised wording for property damage and business interruption policies called ONE Form. ONE Form is currently issued by all Swiss Re-owned local offices and is beginning to be used by select network partners.