Coverage options for multinationals
Brokers working with multinational companies must understand “what [clients’] drivers are for the placement of insurance,” says Erin Magilton-Morneau, JLT Canada’s managing director, Toronto branch leader and national leader of large and risk-managed accounts.
Companies working in the highly regulated financial services sector, as well as other industries where reputation risk is a big concern, may prefer admitted policies—ones placed with government-approved insurers and comply with local regulations.
Master policies in many companies’ home jurisdictions sit on top of admitted papers, filling in any gaps with Difference in Conditions and Difference in Limits coverage.
But for daredevil clients who like maintaining low deductibles, non-admitted papers may be the way to go. These policies can be cheaper and more flexible, and don’t have to be administered by a locally admitted insurer, says Magilton- Morneau, but “you’re not necessarily following the local requirements.”
Businesses can choose to be non-compliant in terms of insurance regulations in foreign jurisdictions, says Grant Williamson, JLT Canada’s senior vice-president of global and risk-managed clients. And if they’re not caught in an audit, there won’t be a problem. But he sees a trend of companies choosing to comply with foreign regulations, especially since the difference in price between non-admitted and admitted papers can be just a few thousand dollars.
And companies can face enormous fines for non-compliance, says Williamson, especially in emerging markets where many governments are looking to increase revenue.
Enter the fronting policy, best suited to the business able to self-insure, since it only gives the appearance of coverage. Let’s say a Canadian firm with such a policy loses a factory in a foreign locale. The local insurer would pay the claim, but back home, the company would refund the money to the insurer’s Canadian arm.
Whatever policy a client ends up choosing, says Magilton- Morneau, “there are nuances in a changing [international risk] environment that no broker in North America can keep up with if it isn’t what they’re doing every single day.”
Copyright 2015 Rogers Publishing Ltd. This article first appeared in the November 2015 edition of Canadian Insurance Top Broker magazine