Navigating the insurance minefield
The company advises that for any particular country, insurance could fall into one of three categories:
• Freedom of Services – With a few specific exceptions, any authorised insurer in a member EU country can issue a policy for a client in any other EU country, except for compulsory insurance classes.
• Admitted Insurance – Certain countries (for example Brazil, China, India, Malaysia) want to retain as much insurance revenue in-country as possible, irrespective of where the parent is from, and so do not allow foreign companies to insure those risks from abroad. This can be insured, either with a local insurance company, or by issuing an "admitted policy" as part of the parent's programme.
• Non-admitted Insurance – This insures risks in a foreign territory through the parent's arrangements, via a master policy placed in another country. The main issue is that non-admitted insurance is not allowed in many countries and acting illegally in terms of local taxes, where such programmes are not allowed, could result in fines or imprisonment.
The risks of not being correctly insured were highlighted by an example involving a subsidiary company in Korea. Non-admitted insurance was in place for Third Party Liability, when an air-conditioning unit fell from the outside of the subsidiaries' building, killing a passerby.
The local office manager was immediately approached by the authorities on suspicion of manslaughter and was asked to produce proof of third-party insurance; unfortunately, the certificate provided by the UK insurer, as part of a non-admitted programme, was not acceptable in Korea and as a result the manager was sentenced to six months' imprisonment, even before being proven guilty of any manslaughter.
Another issue associated with overseas programmes is local taxation of premiums. Local fiscal Authorities are becoming increasingly vigilant about ensuring they receive the correct payments from overseas insurers. Both local and globally charged premiums attract premium tax when a premium is charged for a risk in particular countries.
Steve Pike, regional sales director at the southern office of UK-based JLT, said: 'Organisations need good advice before any action is taken, to avoid the myriad of potential pitfalls.'