When should your client purchase locally admitted insurance?

U.S. domiciled companies with a presence in foreign local jurisdictions are exposed to local laws, regulations, insurance taxes, penalties, and 3rd party lawsuits. The question that most often follows from brokers is the type of insurance coverage needed. Should an insured purchase locally admitted coverage? Or should they allow coverage for foreign exposures to be placed solely on a non-admitted basis as part of a global master policy? While there are always exceptions and nuances based on the customer, we generally point to the three below scenarios for when locally admitted coverage should be placed:

1. When local admitted coverage is compulsory

Certain territories have compulsory coverage requirements, which means the coverage is mandatory and must be provided through a locally licensed and authorized carrier. A few common examples that apply to all types of employers operating in the local jurisdiction are UK Employers Liability (EL), Hong Kong Employee Compensation (EC), and Singapore Work Injury Compensation (WIC).

2. When admitted insurance is required

Many countries prohibit the use of non-admitted insurance. This means that if insurance is purchased to cover a local entity, the insurance must be purchased through a locally licensed and authorized carrier. In these instances, providing foreign coverage solely on a non-admitted basis is not allowed if the coverage is available in the local market. Scheduling an insured’s foreign subsidiary as a named insured on a non-admitted master policy can circumvent regulations, in the absence of a local policy. The implications for not complying with admitted insurance requirements can include tax assessments, penalties, and both corporate and individual legal liabilities. Common territories that prohibit non-admitted insurance include but are not limited to China, India, Japan, Mexico, Philippines, and South Korea.

3. When locally insurable exposure is best insured through a locally admitted policy

Locally insurable exposures are best insured through a local admitted policy, even if a jurisdiction allows the use of non-admitted insurance. Some benefits to consider when deciding on placement of locally admitted insurance include:

• Provides insureds with protection offered through a locally regulated carrier.

• Provides coverages that are standard and often unique to the applicable territory (also known as “Good Local Standard”).

• Meets common requirements in contracts and leases.

• Local jurisdiction premium taxes are appropriately remitted to local regulators.

• Provides access to government supported insurance pools.

• Allows the locally insured entity to receive a claim payment directly from the local carrier, mitigating the need for cross border financial transactions that may trigger taxes and penalties.

One Program, Multinational Exposures

A controlled master program is a unified insurance program that covers multinational exposures through a non-admitted master policy and local admitted policy underliers. Pairing U.S. and overseas coverage with a single global carrier provides a seamless solution mitigating coverage gaps. Our Global Controlled Master Program is a singular solution for both U.S. and foreign insurance that can meet the needs of the most complex multinational companies, offering solutions in over 170+ territories around the world through the company-owned RSA Global Network.

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