Case study: International insurance program for leading
e-commerce aggregator
A fast-growing e-commerce aggregator headquartered in Germany with a strong operational presence in the US and several European countries, specializing in the acquisition and scaling of online stores & merchants. The company operates a platform that aggregates third-party stores, optimizes their logistics and offers marketing services. With a turnover of 500 million euros, the company was faced with the challenge of developing a comprehensive insurance program to cover its international activities and meet the specific risks of the e-commerce industry. At the same time, all the companies that were acquired or from which the company emerged had their own insurance policies of varying quality. In the interests of consolidation, a cost-efficient solution was also to be found.
Our team of experts was commissioned to develop a tailor-made, international insurance program. The focus was on the US, UK and European markets, where the regulatory requirements and risk landscapes vary greatly. At the same time, it was important to be able to meet the requirements of the marketplaces (Amazon and Shopify) with regard to insurance confirmations in a uniform manner worldwide. The starting point was around 50 different insurance policies spread around the world.
Challenges
- D&O:
A business case that generates significant losses and is only expected to break even in the medium term due to M&A activities is difficult to explain for traditional D&O insurers - especially if extensive exclusions in the insurance contract are to be avoided. In addition, the consolidation of existing cover and the market differences between the USA and Germany had to be taken into account. - Cyber:
The multitude of different IT systems, a large amount of personal data and a cyber security infrastructure that has not grown fast enough make it difficult to provide cyber insurance. However, this is required by investors and therefore poses a particular challenge. - Product liability:
The products offered vary greatly and are not always subject to adequate quality assurance. Together with the varying risk appetite of different insurers, this posed a major challenge in underwriting and negotiating with risk carriers. At the same time, there was a large and very expensive policy in the USA that offered considerable cost-saving potential by transferring it to the German market. - Transport:
The transport from China to the warehouses worldwide and the subsequent collection by Amazon or other fulfillment service providers took place via different transport routes. In addition, the transfer of risk varies greatly between the different purchased companies. This posed a challenge when developing a cost-efficient transport insurance policy. - Warehouse insurance:
Stocks in warehouses are highly variable due to seasonal business. Added to this is the extreme increase in natural disasters and fires, for example in the warehouses in California. An overall tough property insurance market also made it difficult to place warehouse cover in various markets. - Internationality & insurance cover requirements:
The client operates in different jurisdictions, which in some cases requires individual and different insurance cover. This also had to be coordinated with the other policies as part of an international program. In some cases, the required insurance cover was not in place, which meant that local insurance obligations were breached and fines were risked. - Scaling:
The strong growth, both organic and inorganic, also had to be taken into account in the insurance companies. This was to avoid a cost explosion with rising sales and at the same time enable planning for the integration of newly acquired companies into the insurance companies. - Different insurance markets:
Insurance cover differs greatly in terms of both content and price, depending on the country in which it is purchased. The majority of cover was in the USA - one of the most expensive insurance markets in the world.
Our approach
Many stakeholders are required to structure insurance programs of this size correctly. Coordinating with all parties involved on the customer side as well as with various underwriters of the relevant insurers and also with local brokers worldwide is a major challenge even before the contract is negotiated.
Step 1 - Analysis
We first drew up a project plan with a clear timeline. We then gained an overview of all existing policies through a structured data collection process. Together with the client, we compiled all relevant data on subsidiaries, their activities, locations, warehouses, transport routes, organizational charts and other aspects. This formed the basis for starting a structured tendering process with insurers and local brokers.
During this phase, we discussed the risk appetite and the necessary sums insured and requirements. This was followed by the invitation to tender with underwriting calls and fixed deadlines. We then set up the program, implemented it, installed local policies and took care of the cancellation or conversion of existing cover where possible.
Step 2 - Negotiation of binding offers
After collecting all the data and debriefing the underwriting calls with the appropriate insurers, we were able to negotiate the final offers and, if necessary, renegotiate again in order to achieve the best offer in the respective lines of business. We carried out a detailed analysis of the conditions, pricing, sublimits and deductibles and presented the advantages and disadvantages of the respective offers.
Step 3 - Implementation
After coordinating the desired insurance policies, we went about implementing them: in some cases, we terminated existing policies or converted them where possible. We also comprehensively documented the insurance contracts. In addition to the master policies, tracking the activities in the local policies was an important task in order to ensure seamless insurance cover.
Step 4 - Ongoing support
We established fixed reporting processes for ongoing support in order to map both renewals and ongoing risk changes as efficiently as possible while minimizing risks from a lack of insurance cover. We largely automated the creation of insurance confirmations so that they were always available on a daily basis.
The most important successes here were:
Cost savings of
approx. 500T€ per year
Increase and standardization of the sums insured
International
Compliance
Reduction of the administrative burden for insurance companies through structured reporting processes
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