ACE Insurance, part of the ACE Group of insurance and reinsurance companies, based in Singapore, recently released a report on Structuring Multinational Insurance Programs for the marine markets. The report was jointly written by Suresh Krishnan, General Counsel for ACE’s Multinational Client Group and Kenneth McKenzie of DAC Beachcroft’s Global Group in London.
ACE said it “provides insights on the general principles which need to be considered when developing a multinational program insuring marine risks.”
The report explains that “multinationals face different local laws and regulations in each of the jurisdictions in which they do business, across the entire range of their operations. “Nevertheless, insureds want consistency of cover and certainty that the insurer will be able to pay the insured in the event of loss without tax or regulatory issues. Equally, the insurer wants to know that it will not be breaking any local requirements (including those relating to payment of insurance premium tax) by issuing cover to an insured in any given location.”
Given these challenges, ACE noted that “innovative insurers working with knowledgeable brokers have devised multinational models, usually featuring a master policy, conventionally bought by a multinational in its own home jurisdiction or from a leading insurance center, which provides local cover and, where permitted, pays locally. This is combined with local policies in those countries where the master policy insurer:
• has no presence;
• is not licensed;
• as an unlicensed insurer may not be able to pay a claim without the claim payment being questioned by local regulators; or
• where there are adverse fiscal consequences to the local claimant, insured or local broker.”
ACE added that, “while marine insurance enjoys a substantial degree of exempt status from otherwise applicable compliance rules, the lack of convergence between international insurance markets and laws means that many issues must be reviewed on a country by country basis.”
The report ends with a useful checklist of questions for multinationals to consider:
1. May one policy insure all risks?
2. Are there different considerations as between Ocean Marine v. Inland Marine?
3. Do any of the participants to title in the cargo need local policies or Difference in Conditions / Difference in Limits (DIC/DIL) policies?
4. What about ancillary insurance coverage grants such as CAR–EAR covers?
5. To whom can the claim be paid?
6. Are reinsurance arrangements compliant?
According to Krishnan and McKenzie: “In an increasingly globalized world, buyers, brokers and insurers need to give more careful consideration to compliance issues in marine insurance. As risks become increasingly complex, multinational clients will require insurance products with an innovative and sophisticated approach.”
Source: ACE Group