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Navigating the evolving regulatory maze for multinationals

At a glance

  • Complying with local insurance regulations and laws is of increasing importance
  • Lawmakers across the globe, especially in emerging markets, are increasingly taking an interest in previously unregulated or loosely regulated activities
  • Zurich’s Multinational Insurance Application tool allows brokers and their clients to keep abreast of constantly updating regulatory requirements across the world

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By reading this article, and correctly answering the three questions underneath, you will have achieved the following learning outcome: Identify the insurance implications of different emerging risks.

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Planning an efficient and cost-effective multinational insurance programme is becoming ever more complex as regulatory pressures – mainly stemming from the fallout of the financial crisis – mount around the world.

With the global economy in expansion mode once again, and multinationals turning in greater numbers to emerging markets to supply their services and manufacturing requirements, these corporations are potentially unfamiliar with legal systems and compliance challenges in many of these jurisdictions.

Complying with local insurance regulations and laws is of increasing importance for multinational businesses as lawmakers across the globe, especially in emerging markets, increasingly take an interest in previously unregulated or loosely regulated activities. This compliance could prevent unanticipated reputational, tax or financial repercussions.

Integrated and consistent worldwide cover

Multinational insurance programmes offer a range of benefits for a corporation, including integrated and consistent cover worldwide that allows for centralised control over risk management and risk transfer practices. Yet intensifying regulatory pressures in certain jurisdictions is making it more difficult for multinationals to insure global risks on a consistent basis.

And for a multinational, relying on separate local insurance policies alone will not fit in well with providing globally consistent coverage, as well as being a costly option.

Many states allow non-admitted carriers, offering multinationals a cheaper overall alternative than using a range of local insurers, as well as providing additional wraparound coverage that supplements required local policies to cover the difference between that and a master insurance policy of a multinational, which is generally arranged in the domicile of the parent organisation.

However, almost all jurisdictions have certain conditions of use around non-admitted insurance and also now seemingly want to collect a greater portion of the insurance revenue, using local laws to achieve this.

Negotiating the regulatory minefield

This regulatory minefield is one that is proving tricky to negotiate for multinationals with certain countries, such as Brazil and India, becoming far more protective of their local markets.

No two large corporations are the same, however. Each organisation is structured differently in terms of its subsidiaries and branches across the globe, what risks are fundamental to its business and the compliance requirements in each territory.

“International programmes are quite complex and only if you have a good understanding of all aspects of a multinational, such as its risk management strategy, global and local contractual requirements, footprint etc, can you begin to structure a solution that will truly match the requirements of a client,” said Petra Riga, Head of Sales and Distribution for International Programs at Zurich Global Corporate.

“For instance, Thailand allows non-admitted risk coverage but following the severe flooding there in 2011, insurers for instance were not allowed to send loss adjusters into Thailand without a local policy in place. This made claims handling quite difficult and clients faced long delays before claims were paid out.”

For those clients that who are increasing their international presence, it is important that brokers look at insurers that fully understand the global markets, specifically how all the countries and regulators view writing out of territory risks, understanding of which country risk coverage can be provided, claims can be paid, and can inform brokers and clients in advance on the situation they may be faced with depending on the international program solution they decide to implement.

Keeping on top of compliance

Zurich’s Multinational Insurance Application tool, an easy-to-use platform, allows brokers and their clients to keep abreast of constantly updating regulatory requirements across the world.

International programmes are quite complex and only if you have a good understanding of all aspects of a multinational, such as its risk management strategy, global and local contractual requirements, footprint etc, can you begin to structure a solution that will truly match the requirements of a client

Petra Riga, Head of Sales and Distribution for International Programs at Zurich Global Corporate

The tool captures data for 180 countries and 42 different lines of business, and allows for an integrated international insurance solution to be developed that aligns with local regulatory and tax requirements.

“Zurich provides the necessary transparency about regulatory and tax changes going on in each country, so clients can formulate their risk strategy, understand what can be done locally and what can be done on their master policy,” said Petra.

With one of the largest footprints in the insurance industry, Zurich is able to provide a reliable service in 210 countries.

“Program structuring is only one part of the story, the insurers ability the to implement an international solution, communicate consistently across the globe and track program service performance is equally important”.

“Crucially, we have expertise on the ground in all the major markets – as well as a global administration system to manage clients in these countries that enables us to issue a policy simultaneously in over 100- jurisdictions, providing contract certainty on day one,” according to Petra.

Zurich also offers a data analytics service, through its client portal – My Zurich, which allows secure online access for its clients to analyse their risk data in any given country – a growing trend for multinationals. “We are seeing this request more and more,” added Petra. “Multinationals are now keen to perform data analytics with their claims data for their own risk management considerations.” Our clients and brokers expect 24/7 access to data on their international program performance, e.g. local policy and invoice issuance, premium payments, risk engineering data just to mention a few.

A tailored approach

So, as multinationals continue their relentless global march, achieving consistent and cost-effective cover worldwide, while at the same time complying with local law and market practices, can seem a daunting prospect.

This is why, rather than a one-size-fits-all approach, Zurich offers a tailored global compliance solution to multinationals with a central master policy and necessary local policies issued as a component of this broader coverage, avoiding the pitfalls of prohibited non-admitted insurance.

Image © Getty

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