For IBM, having a global insurance program simply makes good sense, according to Kathleen M. Ireland, vice president of global risk and insurance.

Doing so allows a consistent approach to coverage as well as the limits purchased, she said. In addition, there are uniform expiration dates for excess layers.

“It allows us to have a mechanism to catch all the costs that we're paying for the insurance, and also to see all of the claims that are happening around the world,” Ms. Ireland said. “This gives us a bird's-eye view to identify loss trends that allows us to develop preventive strategies.”

Ms. Ireland added that having a global insurance program also helps IBM smooth out the costs because “we're buying insurance for the entire corporation as a whole, so we've got the economies of scale when we go to the marketplace.”

The benefits go beyond the strictly financial, though, she said, because the global approach helps the company develop new risk mitigation strategies.

She said that approach allows IBM to see trends in types of accidents and mitigate them. She cited as an example an incident when IBM was shipping hardware products out of a particular country. In order to accommodate the plane that was able to fly out of that airport, the shipper unpacked the equipment. “Obviously, it was not going to get there in one piece if it was out of its crate,” she said. “This was not apparent until we dug into what was occurring at this particular location.”

“So, we look deeply into each loss event, then bringing that forward as a lesson learned in implementing a best practice,” Ms. Ireland said. “That has been the key to us having very successful, robust programs — and also at a very competitive cost.”

Yet another advantage is that the global approach allows the company — “and this is very important to IBM” — to be in compliance with all local laws and regulations as far as admitted insurance coverage requirements around the world and to be able to give evidence of those coverages to customers, she said.

Under the global approach, Ms. Ireland's department takes an overall consolidation of the exposures, does the risk evaluation in its office at IBM corporate headquarters in Armonk, New York, reviews the terms and conditions and works with its brokers to design what the coverages will entail.

She cited confronting cyber risk as an example.

“Just think about certain areas like cyber risk, where the definition of what's personal special private information keeps expanding depending on what government you talk to and what part of the world you're in,” she said. “We put all of that together and then we draw the box of coverages as broadly as we can to anticipate not only in the next 12 months but in the next 18 months” as well.

The risk management department reviews all of IBM's policy terms every year.

“We also are very actively engaged in looking at new risks that are coming — our team sits on the merger and acquisitions due diligence team, so that when the risks are being contemplated in an acquisition, we're able to give feedback immediately if that would change IBM's risk profile,” she said. The department also works with IBM's various support functions around the company such as real estate, human resources, legal, accounting, communications, the logistics and supply chain continuity team and business controls “to make sure all of those stakeholders are at the table when designing and addressing what their needs are,” she said.

“On average it takes 15 to 20 different insurers to build each one of our programs because of the size of IBM,” she said. “We work very hard to find the strengths of each because we firmly believe that there's a win-win for everyone. Once we understand what their risk-bearing appetite is, where they're comfortable playing on our panel, we work very hard year after year to place them on the program.”

IBM also balances the business placed with any single insurer in accordance with corporate guidelines, she said.

Ms. Ireland stressed that the company believes in partnership, and that collaboration is a key value of IBM. Collaboration with “our customers, with our business partners — and we see our insurers as true business partners of ours — allows us to go out to new frontiers and undertake new activities, and they stand alongside us to help us manage the risk,” she said.

“We try to make sure that we find the right balance for the right insurance company to be at the right point in that layer,” she said. “We look to balance them across other programs that we have. We try to be very fair with everyone getting equal opportunity to participate where they're comfortable at the price where they're willing to give us their services.”

Doing so is a matter of fairness, she said. IBM believes small insurers can succeed as well as large ones, she said.

Ms. Ireland likened the approach to an orchestra, where every year each participant plays a different instrument but all are following “the same score of our policy wording, and each one has a unique value that they bring. So they're individual instruments but when we get it all together each year and everybody's where they need to be, it's just beautiful.”

IBM works hard to have a balance for the sake of stability, so the risk management department looks to keep insurers on the program long-term, according to Ms. Ireland. “We're not a price buyer, so that helps us eliminate a lot of the churn that comes with always having to secure lower and lower premiums.”

The way IBM keeps its premiums competitive is with all of its strategies leading to insurance being a last resort by preventing losses from occurring. If losses do occur, “we work very, very hard in examining what the parameters were around that case and do everything we can to reduce (exposure). The biggest lever you have is on business income loss, so the quicker you're back in business, the less that amount is.”

The company has business continuity planning around the organization that helps it get back very quickly. By having an attractive loss portfolio, IBM's Bermuda captive allows it to dig deep, as the risk management department is involved in the adjusting of every one of those claims to get the lessons learned and improve it.

“Part of my job is to be the face of IBM to the insurance community,” and partner with the insurers, the vendors and the brokers, she said. “Part of what we do to support that is we serve on their committees, and what we do is give them insights to what's working well, ways that they may want to reorganize their business model, other ways to explain and identify what the new needs are for major companies like IBM and to be willing to be able and ready to meet those needs. It's a very collaborative approach.”