Going global

25 April 2008

More crane operating companies are becoming involved in, or are considering getting involved in, international business operations. Due to the strength of the worldwide construction market, cranes in every capacity are in demand around the world. There is also great demand globally for experienced and qualified crane operators.

Among the many challenges to doing business in another country, risk management and insurance issues are among the most complicated and require detailed analysis, planning and follow through.

At the top of the list of considerations when a crane operating company is assessing opportunities in other countries is risk management. Often, this is something that is taken care of at the last minute, which can severely impact the viability and profitability of the project. It is strongly recommended that if you plan on doing work in another country, especially if you have not done work in that region before, to do your insurance and risk management planning very early. It could mean the difference between taking the job or not, if the cost of coverage is prohibitive, which in some cases it can be, depending on which country is involved.

Many questions must be answered in assessing risk management and insurance options when doing business in another country. There are many aspects to the process, from shipping the equipment to the place where it will be working to insuring the equipment where it will be working. The first question you will ask your insurer is: Will my domestic cover suffice and cover my operations in whole in another country or will it apply on an excess or difference in condition basis?

More cover

In many cases, you will need to get new or additional cover for your machines on a local basis, from an insurance company in the country where you will be working. If local insurance cover is not required, the crane operating company would need to assess if its own cover will transfer to the country where it was working and what the claims handling capabilities and procedures would be in the event of a loss. The company should contact its agent, which can help determine whether its domestic policy will meet the cover needs or if it will attach excess or on a difference in condition basis. The agent can assess if there needs to be cover over and around local cover.

More than likely, the agent will have many questions, the most important being: Will you be using local operators or will you send your own operators to operate the cranes? For most companies, using their own operators is the best of both worlds because they have more control. If you are using local operators, you have to look at local training and certification requirements, as well as safety guidelines and whether the operators have adequate training to operate the equipment safely. Again, all of this needs to be assessed at the front end, when you are bidding the job.

Who is using it

Again, the biggest concern of the insurer is who will operate the equipment. If the employees of the insured are in control of the equipment, they are more likely to be familiar with it and to understand its capabilities and operations. Language differences can be a big obstacle. Do local operators understand internationally recognized crane operating signals? If you are using your own operators, you can usually overcome these problems. If you are using local operators there are many questions to ask. Will you need an interpreter on the jobsite to help with translation? An interpreter may be needed in some capacity to determine if the local operators are appropriately trained and if they actually understand the equipment and can run it safety. There are things to consider, for example, the different calibration of machines, and metric versus imperial and other measurements.

Compensation for workers

Another issue to consider is whether the country in which a crane operating company will be operating requires workers' compensation. Some countries will require workers' compensation cover and others will not. Canada, for example, does not require workers' compensation because it has its own national health plan.

Depending on the country in which you will be working, there probably should be thought given to some form of political risk cover for employees and equipment, such as kidnapping, ransom and expropriation and/or impoundment of assets. If a government decided to take over it could, essentially, seize a company's equipment and keep it. You never know what could be happening in some countries. Political risk is an area that should be looked at by the crane operating company and the insurer.

The issue of catastrophic loss should also be reviewed, especially in certain countries. Will you be operating in a country where there is a higher risk of hurricanes, typhoons, earthquakes, floods or tsunami? These are real concerns in many regions of the world.

Probably the biggest thing to consider is the insurance cover needed to transport the cranes and related equipment to the country in which it will be working. In many cases, this can be quite costly, and if it entails ocean-going shipments, specialized or separate insurance cover is almost always required. There are also tariffs and fees and so forth, and assuring that you can hire reputable people for loading, unloading and transporting the equipment over the road once it arrives at the port.

Depending on the country, the cover that many companies have acquired through the SC&RA's insurance programme, administered by TurnKey Insurance Services, will suffice. We do have some capabilities for covering equipment in the western hemisphere, in the Caribbean region, in some Central and South American countries and, of course, Canada is not a problem. Mexico typically requires local insurance to be purchased.

Finding cover

If the SC&RA programme does not cover operations in a given country, we will try to help you through some of our brokerage connections. For international members of SC&RA, we can help them with insuring their equipment in the US. At this point, we do not have comprehensive international cover.

Finally, there has been a lot of inquiry about buying and selling cranes internationally and the insurance implications of these transactions. When you sell a piece of equipment, typically the possession and responsibility would pass to the purchaser as soon as the title passes. In that case, the new purchaser would be responsible for getting the equipment to its final destination and would be responsible for transit and insurance of transit. Sometimes, however, transit costs are a part of the sale, which means the seller would need to investigate these costs before the sale. Transit insurance can be very expensive when you factor in the size and weight of a crane and overseas freight.

The bottom line is that doing business globally involves special considerations that are not always obvious. Risk management and insurance should be given priority consideration when assessing the potential for doing business in another country. •

Michael Leamanczyk is executive vice president of underwriting at TurnKey Insurance Services (formerly Special Risk Services Group), the exclusive programme underwriter and administrator of the Specialized Carriers & Rigging Association member insurance and risk management programme. Contact him at mleamanczyk@turnkeyins.com

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