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  • ACE in the U.S. - A Leading Global Insurance Organization
    result of technological developments an aging population economic forces and evolving patient expectations Concurrent with these transformations in healthcare the US Environmental Protection Agency EPA has embarked on an ambitious effort to restore momentum to its core programs Many of the environmental exposures of healthcare organizations may fall under these core programs or similar state regulations making it important that healthcare organizations including hospitals labs MRI facilities clinics and physician offices maintain a sharp focus on environmental compliance Maintaining this focus and identifying emerging environmental exposures while in a period of growth and rapid change will be a continuing challenge for risk managers compliance officers and administrators Environmental Structuring Multinational Insurance Programmes Identifying Challenges and Solutions for Multinational Environmental Impairment Insurance Programmes April 2014 Environmental As patterns of business and trade continue to globalise shift and grow in complexity risk managers of international companies are increasingly seeking risk management and insurance solutions that respond to their changing multinational business activities Traditionally demand for multinational insurance solutions has focused on property and casualty risks However as the risk environment grows ever more complex companies are now seeking more robust solutions in respect of emerging risks as well including environmental risks Environmental Global Environmental Regulation Big Demands Bigger Challenges October 2011 Environmental Right now there are more than 3 460 new environmental regulations awaiting attention from legislators and regulators around the globe Some touch on areas of environmental policy in air water and land use that are well established Some break new ground and posit new powers for pollution prevention control and remediation And no matter where on the planet your company does business they all have the power to profoundly alter how you do business In addition to new initiatives increased attention is also being paid to measures already on the

    Original URL path: http://acegroup.acegroupaccess.com/ace-perspectives/environmental-risk/archived-podcast-going-global.aspx (2016-02-13)
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  • ACE in the U.S. - A Leading Global Insurance Organization
    strategic tool for companies to both attract and retain directors and officers given that without adequate protection many talented individuals may be unwilling to undertake the enormous personal risk of managing or joining the board of a publicly traded entity let alone a multinational corporation whose shares may likewise be traded in multiple stock exchanges around the world The vast majority of stand alone Side A programmes have Differences in Condition DIC coverage and are commonly referred to as Side A DIC policies The DIC feature requires the Side A DIC insurer to drop down to pay covered Side A defence costs or indemnity payments if the terms of the more restrictive ABC policy exclude such Side A payments or if one of the underlying insurers is insolvent or otherwise refuses to pay a valid Side A claim within 60 days By way of illustration a corporation may purchase a single policy with 125 million in ABC coverage with a worldwide territory for both the parent company and its subsidiaries affiliates and joint ventures referred to collectively herein as affili ates followed by a dedicated stand alone Side A DIC insurance programme for 75 million in excess of 125 million also with a worldwide territory covering both the parent company and affiliates While this structure appears to satisfy the insurance goals of many clients there are certain execution risks as well as tax and regulatory risks which must be analyzed and addressed in order to ensure a materially compliant programme and a programme that can respond to claim activity anywhere in the world The key question when considering such a single policy with worldwide territory is whether local legal defence costs and indemnity payments may be paid in a country that severely restricts a local insured from purchasing unlicensed insurance to insure local risks or in which the insurer is not licensed to conduct the business of insurance A well constructed global D O insurance programme should take account of local law if the directors and officers are to be properly protected A recent New Zealand decision provides a striking example Following the collapse of the Bridgecorp Group the directors faced criminal charges and the threat of a NZ 400m claim by the receivers The directors had exhausted a NZ 2m defence costs only cover and the issue before the court was whether they could recover the rest of their costs under the NZ 20m D O cover issued in New Zealand The receivers objected pointing to a 1936 New Zealand statute which provides that on the happening of an event giving rise to a claim against the insured there is a charge over the insured s liability policy in favour of the claimant The receivers potential claim was large enough to exhaust the remaining limit of the D O insurance cover In September 2011 the New Zealand High Court ruled that the entire NZ 20m of D O policy monies were ring fenced for the benefit of the receivers even though they had not yet decided whether to pursue a claim against the directors and accordingly the policy could not pay the directors legal defence costs This decision has prompted local insurers to introduce separate limits for such defence costs a variation from traditional Side A insurance which insures both defence costs and indemnity payments While this is a unique situation New South Wales Australia has similar legislation which may now be tested As the recent New Zealand decision aptly demonstrates a multinational corporation must appreciate all of the risks that its directors and officers face in the jurisdictions in which it operates to ensure that its D O insurance will perform to expectations 6 A critical concern is whether a single D O multi national insurance policy which includes a worldwide territory can pay claims in all of the jurisdictions where the insured operates and directors and officers suffer loss As explained directly below the sole concern in this respect is Side A claim payments because the insurable interest concept wholly applies to Side B and Side C claim payments Considering Insurable Interest When Structuring Multinational Insurance Programmes in Countries that Restrict Unlicensed Insurance Multinational corporations are generally governed in a way that permits them to operate as seamlessly as possible across national borders creating synergies that lead to more competitive pricing innovation and profit It is no wonder that these corporations prefer to take the same approach to structuring their D O insurance programmes Instead of having each affiliate negotiate its own policy in its own jurisdiction there is often a centralized effort to efficiently achieve the best terms and conditions and price Indeed the majority of multinational corporations employ risk managers located at the parent level whose main responsibility is to negotiate and administer insurance programmes that provide coverage for the parent company as well as its affiliates and directors officers and employees at both the parent and affiliate levels National insurance regulations governing the purchase of insurance policies create a challenge for multinational organizations seeking to insure such risks in a consistent and cost effective manner 7 However a multinational D O insurance pro gramme may be designed in a way that satisfies the need for consistent coverage and limits for an organization s worldwide operations and that exhibits deference to the tax and regulatory requirements in each country A key question that needs to be addressed is whether D O insurance policies purchased to provide worldwide insurance protection can deliver this protection The master policy arranged by the parent may be able to cover some of its foreign subsidiaries for example an ABC D O insurance policy purchased by a British parent company from an insurer licensed only in the UK can legitimately cover subsidiaries elsewhere in the EU 8 It can a fill coverage gaps in local policies with inclusion of Difference in Conditions DIC and b provide consistent limits with inclusion of Difference in Limits DIL But could this same policy directly indemnify the parent company s Indian affiliate or the affiliate s local directors or officers for the local legal defence costs incurred and any settlement or judgment when they are sued in India for a loss in India 1 Insurable Interest A parent company has a financial or economic interest in its affiliates through its shareholding or other ownership interest or perhaps via legal or contractual obligations In the United States most major countries in the European Union including the United Kingdom France and Germany Switzerland Mexico and Brazil as well as in Australia and most countries in Asia including Singapore and Hong Kong financial or economic interest is insurable and the parent company may procure insurance directly for its insurable interest in such entities This parent policy can supplement the local policies arranged by subsidiaries offering the parent company DIC DIL cover In many countries under such a parent policy the parent s economic loss is measured by reference to the affiliates actual losses essentially a form of agreed value policy In other words if an affiliate suffers a loss the parent company can be deemed to suffer a concomitant loss because both the affiliate and parent company are part of the same corporate organization and ultimate financial statement 9 A key question that needs to be addressed is whether D O insurance policies purchased to provide worldwide insurance protection can deliver this protection A company s affiliates may well arrange local policies in the countries where they are based especially in jurisdictions that mandate particular coverages prohibit non admitted insurance or place an onerous process on a local insured or local broker procuring non admitted insurance A locally admitted insurer will underwrite and issue the local policy complying with the local insurance laws and will calculate and remit the applicable insurance taxes and fees Claims under such local policies will be adjusted and paid locally This solution a combination of local policies and a master policy covering the insurable interests of the parent company provides structural protections for insurers producers and multinational enterprises against issuing soliciting and procuring insurance as the case may be in jurisdictions that prohibit non admitted insurance Such a solution also addresses related premium tax liability in such jurisdictions In particular all premiums in respect of the master policy may be allocated to the parent and its affiliates in jurisdictions where non admitted insurance is permitted and premiums on permitted local policies may be allocated to the appropriate affiliate in the relevant jurisdictions Because this solution clearly identifies the jurisdictions in which the insurance is being provided it is easier to identify the amount and allocation of premium taxes and other charges and fees among the insurer the producer and the insureds Moreover any claims under the parent policy could be paid to the parent in the parent s jurisdiction or in jurisdictions where the insurer is licensed Applying Insurable Interest to D O Policies Against this backdrop the next step is to analyze the various components of an ABC D O insurance programme to ascertain whether the insurable interest concept is applicable to certain or all of the coverage grants The parent corporation certainly has an insurable interest in the impact on the value of its holding when its subsidiaries are faced with securities litigation Accordingly it is able to arrange its own Side C coverage which is in itself a form of corporate asset protection Likewise the same holds true for Side B insurance which indemnifies the corporate entity for the loss incurred by its obligation to indemnify its directors and officers This is another form of balance sheet protection The fact that the loss is incurred through the affiliate indemnifying its directors and officers as opposed to defending and settling claims against itself is immaterial A parent company possesses an insurable interest in its affiliates obligations and may therefore purchase Side B and Side C insurance for itself where in addition to any insurance purchased by the local affiliate the parent may have a legal or contractual obligation to reimburse the affiliate for those amounts in excess of the limits or for conditions that may not be insured by the policy purchased by the local affiliate Irrespective of such an obligation a parent company has an insurable interest in the value of its holding in its affiliates because all losses incurred by the affiliates potentially impact the parent company s financial statements Side A insurance is a different kettle of fish Although it is customary for a corporation to purchase Side A insurance for its directors and officers the Side A policy is providing personal asset protection for individual directors and officers against claims that are not indemnified by the corporate entity Accordingly by definition the corporation has not suffered a loss and is not indemnifying anyone for the Side A loss Rather the insurer pays the legal defence costs and any indemnity payments to or on behalf of the director or officer often in the jurisdiction where they are personally subject to the lawsuit A parent cannot have an insurable interest in amounts that its affiliate is not legally or contractually obligated to pay let alone amounts that its affiliate cannot as a matter of law pay Those are liabilities of the individuals and the insurable interest concept may not extend beyond the corporate financial statement This means that Side A personal asset protection insurance purchased on a worldwide coverage and territory basis may not be able to respond locally in all instances when coverage is triggered under the terms of the master policy purchased by the parent company Local Side A policies should respond locally and where an excess Side A DIC DIL policy is underwritten and issued outside the jurisdiction concerned the insurer may pay a covered claim in the jurisdictions where it is licensed or subject to any restrictions on the local broker and client may pay a covered claim in jurisdictions where the loss occurs and that permits unlicensed insurers to provide this insurance Drawing these threads together a multinational enterprise has a variety of means of addressing the regulatory and tax challenges in jurisdictions that prohibit non admitted insurance or impose arduous conditions on brokers and insureds that use it Its local affiliates may purchase a local ABC policy in such jurisdictions This addresses any concerns that local regulators would have with purchasing insurance from an unlicensed insurer One shortcoming to this approach is that the policy limits may be eroded by Side B or Side C payments and the individual directors and officers could be left with no policy limits for Side A claims For this reason some multinational enterprises purchase locally both an ABC policy and a stand alone Side A policy that insures losses excess of the ABC policy This addresses the concern that the more frequent Side B or Side C claim payments could erode the total limits available before the individual directors and officers are in a position to claim under the policy However a potential shortcoming with this approach is that the locally admitted ABC and or Side A policies may have more restrictive terms and conditions and or lower limits than the master policy To address the difference in conditions DIC and difference in limits DIL issues many multinational enterprises will include a DIC DIL provision in the master policy which provides that the master policy will respond in the event that the local policy contains more restrictive terms and conditions or a lower policy limit The master policy would typically be purchased by the parent company in the parent s jurisdiction Where affiliates are in countries that allow them to arrange cover with non admitted insurers abroad without imposing burdensome requirements they too can have ABC insurance under the master policy In other cases the master policy should expressly exclude coverage of the affiliates concerned and it can instead provide Side B and Side C insurance to the parent itself in respect of its interests in its affiliates Side A insurance cannot be provided to the parent company in these circumstances because the parent does not have an insurable interest in claims made against its affiliate s directors and officers Such Side A coverage may be provided by an insurer licensed in the territory concerned or where this is not prohibited locally by a foreign insurer that is not licensed there Under this final scenario the master policy could insure the parent company s insurable interest in the legal and contractual obligations reflected by the local Side B and Side C coverage grants of the excluded subsidiaries affiliates and joint ventures consistent with the laws of the parent company s domicile 10 However certificates of insurance is sued in jurisdictions where the master policy in surer is not licensed or where non admitted insurance is prohibited may only reflect the terms conditions and limits of the local policy and may not include those of the master policy Side A personal asset protection insurance purchased on a worldwide coverage and territory basis may not be able to respond locally in all instances when coverage is triggered under the terms of the master policy purchased by the parent company Although the intent of the multinational enterprise and the insurer is to purchase a global D O insurance programme local policies and master DIC DIL policy with one global programme aggregate limit one of the key challenges faced by insurers is effectively controlling the aggregation and stacking of local limits potentially to the insurer s detriment In order to mitigate this potentially adverse result insurers should consider an endorsement or a provision in local policies subjecting the local policy limit to the global programme aggregate limit In addition or alternatively insurers should also consider a deed of indemnity or a parental guarantee that reimburses the insurer for any amount paid by the insurer in excess of the programme aggregate limit In substance this solution may provide the coverage and terms that satisfy the participants in the multinational programme while mitigating execution uncertainty or the risk of unauthorized insurance penalties in local jurisdictions Through inter company allocations and appropriate trans fer pricing documentation based on the actual experience of the multinational enterprise the costs and benefits of the global insurance programme may be allocated to the appropriate entities in a transparent and materially compliant manner 11 Checklist Before underwriting and binding a multinational D O insurance programme participants in the programme should consider a check list such as the following which recommends a bottom up approach focusing on requirements for local policies as well as a top down approach that ensures potential gaps in those local policies are covered by an excess DIC and or DIL policy 1 What are the conditions imposed by a local jurisdiction for an affiliate to insure D O liabilities If insurance is arranged must it be issued by a locally licensed insurance company Are there circumstances in which risks can be insured by an unlicensed insurer 2 If only local insurance is allowed does it provide the expected coverage Is the local policy tailored to insure the local affiliate s reimbursement obligations under Side B and Side C Is a Difference in Conditions DIC master policy needed to insure gaps in the local Side B and Side C policy Do local directors want a stand alone Side A policy that is tailored to insure them locally for non indemnifiable acts 3 If only local insurance is allowed does it provide the expected limits locally Are the local policy limits adequate to insure the local affiliate s reimbursement obligations under Side B and Side C Is a Difference in Limits DIL master policy needed to insure gaps in the local Side B or Side C policy Do local directors want a stand alone Side A policy that has adequate stand alone limits or do local directors wish to share Side A limits with Sides B and

    Original URL path: http://acegroup.acegroupaccess.com/ace-perspectives/executive-risk/side-a-do.aspx (2016-02-13)
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  • ACE in the U.S. - A Leading Global Insurance Organization
    Casualty Insurance Accident Health Insurance Life Insurance Reinsurance Small Mid Sized Companies Chubb Mobilassurance Perspectives Multinational Risk Environmental Risk Executive Risk Cyber Risk Specialized Risk Investor Information Media Center News Releases Media Contacts In the News ACE Perspectives Executive Risk ACE s Zacharias Aims GPS Radar At Multinational Ds Os by Susanne Sclafane While it is not surprising for a global insurance carrier representative to be focusing her attention on worldwide liability trends for ACE s Carol Zacharias finding U S companies fully engaged in discussions about these trends is unfamiliar territory Insureds did not have an interest in coverage or protection overseas years and years ago says Zacharias who is Deputy General Counsel for ACE North America referring specifically to a historical lack of demand for directors and officers liability insurance from U S multinationals for non U S directors and executives Some carriers tried to sell it and the insureds weren t terribly interested And many carriers weren t interested in it either she says In just the last four or five years the situation has changed dramatically and D O buyers are now seeking out information about global D O policy provisions including an ACE endorsement first

    Original URL path: http://acegroup.acegroupaccess.com/ace-perspectives/executive-risk/gps-radar-on.aspx (2016-02-13)
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  • ACE in the U.S. - A Leading Global Insurance Organization
    number of new filings dropped in the first quarter of 2012 to an annualized rate more akin to the level set in 2010 In addition to the effects that an improving economy has had on company fortunes and thus on litigation the falloff may be attributed in part to a decline in M A activities leading to fewer merger objection suits At 377 new securities suit filings in Q1 2012 the annualized level of about 1 500 was 16 percent below the high watermark set in 2011 The number of new filings in the quarter was also 9 percent below the previous quarter and over 33 percent below a year earlier in Q1 2011 Securities fraud cases mostly regulatory actions were once again the leading type of new securities suit filing in Q1 2012 but down from the previous quarter and the first quarter of 2011 Despite this falloff regulatory actions remained a dominant force Securities class action suits although down from the average quarter in 2011 was slightly up from the previous quarter when all other major types of suits dropped Say on pay issues have brought derivative actions back into the limelight over the past year Breach of fiduciary duties suits driven by so called merger objection suits became litigators bread and butter in recent years and the level remained higher than other types of private litigation in Q1 2012 but dropped substantially since mid 2011 The drop in new merger objection suit filings in the first quarter was likely due in part to the falloff in M A activities Globalization has had a substantial impact on securities litigation over the past years and this trend continued in the first quarter of 2012 with filings against non U S companies reaching 18 percent The total number of suits

    Original URL path: http://acegroup.acegroupaccess.com/ace-perspectives/executive-risk/advisen-securities-litigation-whitepaper-2012.aspx (2016-02-13)
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  • ACE in the U.S. - A Leading Global Insurance Organization
    merger objection suits At 377 new securities suit filings in Q1 2012 the annualized level of about 1 500 was 16 percent below the high watermark set in 2011 The number of new filings in the quarter was also 9 percent below the previous quarter and over 33 percent below a year earlier in Q1 2011 Securities fraud cases mostly regulatory actions were once again the leading type of new securities suit filing in Q1 2012 but down from the previous quarter and the first quarter of 2011 Despite this falloff regulatory actions remained a dominant force Securities class action suits although down from the average quarter in 2011 was slightly up from the previous quarter when all other major types of suits dropped Say on pay issues have brought derivative actions back into the limelight over the past year Breach of fiduciary duties suits driven by so called merger objection suits became litigators bread and butter in recent years and the level remained higher than other types of private litigation in Q1 2012 but dropped substantially since mid 2011 The drop in new merger objection suit filings in the first quarter was likely due in part to the falloff in M A activities Globalization has had a substantial impact on securities litigation over the past years and this trend continued in the first quarter of 2012 with filings against non U S companies reaching 18 percent The total number of suits against non US companies increased compared to the average quarter in 2011 Considering that suits across the board dropped the percentage of non US company suits leaped from 14 percent in 2011 which has been on a steady upward march since 2009 A major cause of this growth in suits filed against non US companies was the burst in suits filed against Chinese companies which represented 29 percent of all such new suits for the quarter Executive M A Risk Management Collateral Liabilities and Solutions March 2013 Executive When global companies and private equity firms engage in mergers and acquisitions they often confront obligations to provide collateral that are associated with the target entity s insurance programs These obligations specifically involve past and ongoing financial risks emanating from the deductibles or self insured retentions that arise under the target entity s workers compensation automobile liability and general liability policies These liabilities in some cases may be absorbed by the target entity s wholly owned captive insurance facility Different state regulatory requirements can further complicate the treatment of these obligations to provide collateral Similar liabilities affect the acquirer in instances where the target entity has substantial surety bond requirements which now become the acquirer s obligation to fulfill and collateralize How best to address such collateral responsibilities from an efficient risk transfer standpoint is the subject of this ACE Progress Report The paper builds upon a series of other ACE Progress Reports assessing M A risks Executive ACE s Zacharias Aims GPS Radar At Multinational Ds Os April 2012

    Original URL path: http://acegroup.acegroupaccess.com/ace-perspectives/executive-risk/podcast-mergers-acquisitions.aspx (2016-02-13)
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  • ACE in the U.S. - A Leading Global Insurance Organization
    change and be difficult to obtain making it challenging for companies to insure multinational risks in a cost effective way and ensure they are compliant To fill this gap the UK risk managers association Airmic has recently launched a global database for policy holders that provides a comprehensive one stop source of information on local compliance requirements around the world Growing diversity of global risks Multinational operations are today exposed to many risks Casualty is the biggest potential multinational exposure according to the risk managers we surveyed but the multinational risk agenda is no longer confined to the more traditional property and liability concerns see chart 4 What is most striking is the strong emphasis on specialist and emerging liability risks Chart 4 Which of the following risk areas do you think create the greatest risk exposures for your multinational operations today 1 Casualty 36 2 Environmental liability 29 3 Property 27 4 Cyber risk 26 5 Professional indemnity 26 6 D O 23 7 Fidelity crime 16 8 Political and trade credit risk 15 9 Power generation machinery breakdown 11 10 Marine 10 11 Business Travel 9 12 Group personal accident 5 13 Construction risk 4 14 Terrorism 1 Chart 5 Which of the following risk areas do you expect to create the greatest risk exposures for your multinational operations in three years time 1 Casualty 36 2 Cyber risk 28 3 Environmental liability 28 4 Property 26 5 D O 24 6 Professional indemnity 23 7 Fidelity crime 14 8 Political and trade credit risk 14 9 Power generation machinery breakdown 10 10 Marine 10 11 Business Travel 9 12 Group personal accident 5 13 Construction risk 5 14 Terrorism 1 For example the second biggest risk area according to respondents is environmental liability Any commercial or public organisation owning or associated with property faces potential environmental liabilities either from past activities on the site or future actions Growing pressure to be socially and ethically responsible greater public awareness of pollution and advances in detection and clean up technologies have made companies more aware of environmental liabilities Moreover the rules and regulations governing environmental exposures vary widely and are in many cases changing rapidly Chapter 2 Multinational Insurance Solutions This research clearly indicates that European risk managers believe that carefully constructed multinational insurance programmes are an effective way to manage today s more complex risk exposures Just under half 49 say that they currently have one or more global multinational insurance programmes in place But in the next three years 83 say that they intend to increase their use of multinational insurance programmes see chart 6 Risk managers indicate that they want the combination of local knowledge and compliance certainty with an overarching programme that provides economies of scale and consistency of coverage Chart 6 Please indicate the extent to which you agree or disagree with the following statements Multinational programmes give companies a combination of control from the centre and a single point of contact with an underlying network of relevant expertise and knowledge in the local markets This gives them the confidence that they have a consistent approach to their cover while also providing assurance that the specific needs of the local market are understood Rémy Massol Multinational Director for Continental Europe ACE A multinational programme can be structured in a number of ways at the parent level at the subsidiary level or through a combination of the two In today s complex regulatory and operating environment Mr Massol says that the most appropriate solution may be to take a bottom up approach which focuses on identifying any requirements for local policies supplemented by a top down approach that ensures the potential gaps in those local policies are properly covered by excess DIC DIL arrangements This is different from traditional approaches for example where companies purchased a global master policy one that they assumed would protect them and manage risks in every country globally where they had exposure But this is increasingly a dangerous assumption to make To a large degree these and other discussions about structure are fuelled by a simplistic and sometimes misguided view that provided that a particular reference source says that non admitted insurance is allowed in a given country there is no need for a local policy and insurance can be provided by a policy issued in the home domicile of the parent company Clive Hassett Director of Multinational Services for ACE in Europe Risk managers and their insurance market partners must be careful to ask the right questions before implementing a multinational insurance programme However an experienced independent team of accounting legal tax and financial specialists including an insurance broker and carrier with international experience should be able to help structure a comprehensive and compliant programme that satisfies the needs of the client the broker and the insurance carrier Chart 7 If your organisation has one or more multinational insurance programmes in place or intends to put one or more in place in the next 12 months what are the main reasons for doing so Benefits of multinational programmes Companies that have already implemented multinational insurance programmes point to two broad reasons for doing so First these programmes provide greater consistency for their insurance arrangements around the world Second they improve certainty both in terms of their insurance arrangements being compliant with regulation and their confidence about any coverage gaps being filled see chart 7 Consistency If you insure with only individual local policies you never know if the cover is enough for your business due to the language and local practices With multinational programmes you always have the master programme as an umbrella with a warranty that you have duly discussed with the global insurer A senior European risk manager As they expand internationally companies are seeking consistency and uniformity across their insurance arrangements What you want at the time of deploying a multinational insurance programme is consistency says David Vigier Group Director Insurance and Risk Management at Europcar International While it is critical that insurance programmes are respectful of local law and regulations you want consistency in the way the insurance papers are issued in various countries consistency in the way the claims process operates and also in the way reporting gets conducted A decentralised approach where each subsidiary or country operation handles its own insurance arrangements results in a patchwork of individual policies with separate underwriters in each local market There tend to be significant differences in coverage by seemingly similar policies issued by different insurers in various countries a problem that is exacerbated by diverse national laws and varying requirements for different types of cover There are huge differences in the coverage quoted by insurers there is no consistency between different quotes says Armin Gutmann Head of Commercial Business at Funk Insurance Brokers Mark Simpson Vice President for Risk Finance at InterContinental Hotels Group believes that his company s use of multinational programmes offers considerable benefits in terms of consistency It enables us to protect our assets colleagues and guests efficiently and effectively in the same way around the world he says We are trying to get a common way of working a standard everywhere that enables us to protect and enhance the global brand Compliance Compliance is an increasingly complex concern for many European industries In today s era of intensifying regulation and corporate scrutiny and the related risks to reputation risk managers need to be confident that their insurance programmes are transparent and compliant and they need to be able to demonstrate this Increasingly companies combine local policies within a multinational framework to increase compliance certainty Michael Heimburger Director of International Risk Management and Insurance at Mondelez outlines the benefits of local policies for his company We have already established local policies for liability excess liability and marine cargo as well as for D O directors and officers The benefits are that we have compliance certainty and we do not have to be concerned that we re not meeting local laws and regulation If a claim happens we would be able to settle it locally Why have some companies not yet implemented multinational insurance programmes The cleanest and most compliant way to structure a multinational insurance arrangement is to have local policies in place in each country says Clive Hassett of ACE In the event of a claim it is much more straightforward to settle it if there is a local policy in place rather than trying to settle claims across borders Clive Hassett Director of Multinational Services for ACE in Europe Our survey shows that not all companies are convinced of the value of multinational insurance programmes The biggest concern identified by 54 of those respondents who do not have a multinational insurance programme is the effectiveness of claims resolution As we have seen a more multinational trading environment has led many companies to experience an increase in claims outside their home market and generally these claims have become more complex Yet the experts interviewed for this report agree that robust multinational insurance programmes consisting of local policies supported by a master policy with appropriate DIC DIL Difference in Conditions Difference in Limits arrangements should be a significant driver in increasing claims certainty not reducing it Appropriate DIC DIL would include a Financial Interest clause which is added to the master policy to clarify and insure the parent company s financial interest in the local entity A similar factor preventing some risk managers from implementing a multinational programme relates to their concerns about the difficulties in managing associated tax issues but Mr Hassett believes that the same logic applies to this argument Some respondents 46 hold the view that their operations are not sufficiently multinational to warrant multinational insurance programmes Such programmes are not appropriate for some domestically focused companies But even companies with limited international exposures can benefit from these programmes especially if their operations span regions where insurance regulations are likely to differ Consider a company that has operations in the UK US Switzerland and China Despite only having operations in four countries a single global policy issued by a EU based insurer will not be able to cover the risks in the latter three jurisdictions due to significant differences in regulation across these markets The bottom line is that the traditional single packaged protection of various standard D O policies may be subject to challenge either from a company s directors or officers who expect certainty or from local regulators in an overseas market who demand compliance A multinational company can only protect itself and its people adequately by separating the elements of D O cover and considering their interplay within an effective global programme structure Rémy Massol Multinational Director for Continental Europe ACE Another reason why companies may stick with the single global policy approach is cost Yet a perception of value for money in the short term can prove to be a false economy A company that invests large sums of money in a new market but then does not cover that investment with a local policy that may only cost a fraction of that investment is likely to endure a costly experience should a loss occur in that market warns Mr Hassett It is often only when a company tries to make a claim that it discovers the true benefits of its cover Indeed more than a quarter of respondents to our research agree that multinational programmes have a positive impact on costs by driving economies of scale while 15 point to their benefits in streamlining insurance programmes generally for example by reducing duplication Responding to new risks Another factor supporting the trend towards more multinational insurance programmes is the growing range of risks that insurers offer to cover Underwriters are looking beyond traditional lines such as property and casualty to emerging risks The market is changing in a positive way states Mr Bekouw There are more solutions being offered Mr Simpson says that InterContinental Hotels Group is continuously looking to expand the risks covered by its multinational insurance programmes We have a global business and we would like more multinational programmes for things that are currently difficult to place on a global basis he says Asked about the categories of risk for which they would consider implementing multinational programmes over the next 12 months respondents again point to more specialist liability based risks such as professional indemnity D O and emerging risks such as cyber see chart 8 alongside the more traditional property and casualty categories This highlights the increasing demand that companies have for multinational insurance across a broad range of risks and also emphasises the opportunity for insurers and brokers with the right underwriting skills and global experience Chart 8 Which types of risk would you consider integrating into a multinational insurance programme over the next 12 months subject to availability Chapter 3 Designing and Implementing a Multinational Insurance Programme Any successful multinational insurance programme depends upon a collaborative three way relationship between client broker and insurer We place a lot of emphasis on our partnership with our insurers we need to co operate and grow together says Massimiliano Furlanetto Insurance Risk Manager at Barilla This works both ways Insurers need to propose programmes that meet our needs rather than just offering existing packages For our part we need to make sure we offer insurers good information on our changing risks Brokers play an especially important role in providing service for clients including answering local questions and helping to compile or validate risk exposure data They are also key to designing any multinational programme The task of the broker is to understand the risks of the client make a risk analysis and put together specifications for the programme says Mr Gutmann The insurer can come up with inputs such as how to structure programmes better or ensure they have special capabilities to improve specifications But the overall structure and crafting of an international programme is the job of the insurance broker European risk managers want insurers to play a role in most aspects of designing and managing a multinational insurance programme and especially in providing them with the management information they need on any programme in force see chart 9 Chart 9 How significant a role should insurers play in the following aspects of structuring a multinational insurance programme Meeting the needs of European risk managers What do risk managers most want from an insurer when it comes to managing their multinational risks When choosing an insurer companies are concerned about balance sheet strength identified by over half of companies surveyed the depth of underwriting expertise the breadth of underwriting capability and consistency of coverage see chart 10 Chart 10 Which of the following factors are or would be most important to you when choosing an insurer to work with to develop a multinational insurance programme 1 Balance sheet strength 51 2 Depth of underwriting expertise 47 3 Breadth of underwriting capability i e across many lines of business 46 4 Consistency of coverage 45 5 Breadth of coverage 43 6 Low cost of insurance 41 7 Agreed service standards 34 8 Degree of ownership and control over global network 25 9 Quality of claims resolution 24 10 Local compliance knowledge 16 11 Capability to help us manage and monitor programme status in real time e g at country and policy level 14 12 Effective technology solutions for managing partners 7 13 Strong client relationship focus 6 14 Capability to provide solutions in countries where non admitted policies are prohibited 5 Balance sheet strength is inevitably a key priority but when choosing an insurer it should probably be regarded as a given Meanwhile the focus on underwriting is driven in part by the growing range of multinational risks to which companies are exposed This also suggests that a traditional proposition covering only mainstream property and casualty risk is no longer enough Obviously we look at the financial strength of all our business partners says Alexander Mahnke CEO Insurance Siemens We also look at the underwriting and claims handling expertise This is a very important area for us when we choose insurers Further one quarter of respondents identify an effective global network as a key factor when choosing an insurance company We want our insurers to be big companies with strong financial capabilities says one senior European risk manager We also need them to have a big network and a good presence globally because we need to issue local policies in 51 countries Service standards Cost is not always the determining factor when selecting an insurer the survey shows that risk managers are also strongly focused on quality of service matters The level of servicing is very important particularly in the day to day issues agrees a senior European risk manager They need to issue policies send invoices or renew the programme in a reasonable time We demand quite high levels of service This research highlights some areas where insurers could improve the service they offer Respondents are least satisfied about technology which relates to the issue of information sharing see chart 11 Risk managers want a steady flow of information and rely on insurers technology platforms to provide them with this One senior European risk manager interviewed for this report says that companies want online access for claims as well as policy and invoice issuing and some insurers are starting to provide this Chart 11 How satisfied are you with the performance of your current insurer s for your multinational programmes in the following areas We have excellent communication with the global insurers for each line they know how important servicing is for us We are getting the level of service that we request In the past three years we have been very lucky because companies were open to our demands We want a company that listens to us and does their best to solve all the problems we may have with our international

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  • ACE in the U.S. - A Leading Global Insurance Organization
    limitations are to any such prohibition or restriction and ii what is a director to do should the corporation choose not to indemnify him or her for defence costs These may provide better guidance as to what insurance solutions are needed Using Corporate Assets to Pay Litigation Costs Interestingly Brazil India China and Russia countries where many European multinationals are building their footprints and where growth is expected to outperform the West in the decades ahead currently do not address the concept of the use of corporate assets to indemnify directors and officers at all In fact these countries laws and those of many others are silent on the issue This suggests they have acknowledged the market acceptance of a local corporation purchasing D O insurance for instance Brazil requires that stock companies disclose the limits of D O insurance purchased and since 2001 Chinese law has expressly permitted corporations to purchase D O insurance under certain conditions So whilst the law in these countries says nothing on whether indemnification is permitted the law expressly permits the purchase of insurance and consequently the safest route for corporations to take to ensure their directors and officers are protected is to buy D O cover Some countries laws give the appearance of expressly permitting indemnification but in fact only provide such restricted rights for companies to indemnify that it is of little practical use to directors A number of countries laws have more than a passing resemblance to now superseded provisions of English law which only permitted indemnification once the director had been finally exonerated e g Ireland Israel Italy Japan Singapore and South Africa In Germany the right to be indemnified is considerably restricted by the requirement that the director did not act in breach of his other duty to the company whether the claim is by the corporation or any third party Therefore in Germany the right to indemnification remains dependent on a final adjudication that no director breached any of their duties to the corporation Interestingly India has recently moved from being a country that permitted only very restricted after the event indemnification to a country whose law the Companies Act 2013 is now silent The Act does however positively affirm the corporation s ability to buy D O insurance at least for executive directors Given the Act is new and it is too early to reach any conclusions as to whether there are now any indemnification rights the Indian corporation can certainly and should buy D O insurance for its directors Meanwhile in all of these countries and in many others besides including the US UK Australia and Hong Kong where there are relatively well defined rules permitting indemnification a corporation may not be able or elect not to indemnify a director or officer notwithstanding the bylaws of the corporation This may happen because the corporation is forced into bankruptcy because it is forced to choose between defending itself rather than its directors or because fellow directors have determined that the allegations against a given director do not warrant an indemnity which of course raises a separate issue of when insureds work in contravention to other insureds in an attempt to deny access to policy proceeds The most obvious circumstance in which the corporation will not indemnify is insolvency In Europe the biggest driver for D O claims is insolvency where the corporation obviously cannot indemnify even where it is permitted by law to do so In some countries there is a further complication around insolvency In a surprising decision the New Zealand Supreme Court recently held that a statutory charge over the proceeds of a D O policy operated in favor of a claimant in an unproven Side A claim so as to deprive the directors of any defence costs resource The corporation was insolvent and so there could be no indemnity The court speculated the directors could still defend themselves on a contingency fee basis or from their own resources which is obviously a profoundly unsatisfactory outcome for those implicated New Zealand is not the only country in the world where there may be a charge over D O policies the issue frequently arises in the US where the insolvent corporation s trustee in bankruptcy may freeze the policy insofar as it contains coverage for the corporation An appropriately structured Side A only protection will pay legal costs pending a determination by the courts that the corporation s D O policy may in fact be used for indemnifying incurred costs Limitations to Indemnity Many laws that are expressly permissive also have limitations such as a where there is a criminal conviction and so the indemnity must be withdrawn and any amounts advanced for defence costs repaid for example in the UK and b there may be no indemnity where there is a liability to the corporation itself for example in Delaware The largest shareholder derivative settlement ever involving News Corp in the US was funded by Side A cover In many jurisdictions the corporation is the primary potential source of claims In Delaware the UK and in other markets the right for a director to be indemnified is simply permissive and not mandatory Yet despite the permissive nature of the UK s indemnification law since 2006 many corporations have still not entered agreements with their directors which would enable a director to enforce a permitted indemnity This means the decision of the corporation to indemnify remains entirely discretionary Further the indemnity agreements entered into may provide a narrower scope for indemnity than the law permits or set conditions on the indemnification which will significantly reduce the instances of when it will be provided or even make the indemnity illusory In practice retired directors often find it more difficult to access the indemnity even where agreed particularly when their retirement was connected with the issues for which the indemnity is sought Some countries laws give the appearance of expressly permitting indemnification but in fact only provide such

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  • ACE in the U.S. - A Leading Global Insurance Organization
    recognise that every good multinational programme is the result of a close partnership between the client their broker and insurer and we look forward to working with intermediaries and risk managers across Europe and beyond to meet their evolving needs Multinational Capturing Consistency and Control Five Strategies to Improve Multinational Business Travel Accident Risk Management April 2014 Multinational As the global economy grew over the past few years providing expansion opportunities for U S and European companies many organizations either ventured into global markets for the first time or expanded their geographical footprint Overseas assignments by executives picked up in number and duration as did more traditional business travel 1 This expanding multinational presence brings increased risk to corporations Injuries and illnesses of employees traveling abroad is a constant concern of multinational corporations one addressed for decades through the purchase of business travel accident insurance In this regard corporate risk managers have typically relied on the advice of their insurance agents and brokers excellent resources generally able to provide thoughtful guidance However as several brokers and agents attest in this market report business travel accident insurance is a dauntingly complex subject For example risk managers must contend with widely divergent and potentially punitive compliance requirements on a locationby location basis Coverage terms conditions and financial limits for both admitted and non admitted insurance often differ Policies are susceptible to language interpretation issues that can cause claim payment problems and since local insurers may not be rated for financial soundness there may be a question as to an insurer s ability to pay claims and provide the requisite services Having varying policy effective and renewal dates and the need to access multiple claim facilities creates a convoluted claims administration process These various concerns create serious dilemmas for corporate risk managers and Human Resources HR professionals entrusted with overseeing business travel risks from an employee health and wellness standpoint In a nutshell there is a pronounced need for these executives to have greater control over these global exposures and more consistency in their treatment This market report introduces a solution a Controlled Master Program on par with similar programs addressing global property and casualty exposures This solution focuses on five key strategies to consider when evaluating present day global Accident Health A H insurance plans Global Growth Growing Complexities Construction services represent a significant portion of global trade World exports of construction rose 2 to 115 billion in 2012 the World Trade Organization estimates with the European Union and Asia representing the major share of that trade 1 Between 2005 and 2012 construction was one of the most dynamic services sectors with an average annual growth of 11 in exports despite a downturn during the financial crisis according to the WTO 2 The leading importers of construction represent both developed and emerging economies including the EU Angola Japan Russia Korea China Saudi Arabia the United States Algeria and Kazakhstan While international trade in construction has been growing every country retains its own laws regarding insurance which makes building a multinational insurance program more challenging U S contractors taking on projects in emerging markets face unique challenges From a legal perspective compliance for U S contractors operating outside the U S is much more complex than for their domestic organizations Because they operate in different countries multinational contractors must adhere to a myriad of local national laws and regulations in several countries with regard to the duty of care they owe to the general public and other third parties They may need to deal with issues involving the extraterritorial scope of legislation and rules pertaining to jurisdiction and choice of law While the U S Canada Western Europe Australia and most of the rest of the developed world have established employer duty of care legislation the majority of the countries where these new global projects are available have not enacted such legislation While some emerging markets may not have articulated or enforced employer duty of care legislation employers may still face liability Expatriates business travelers to and from these countries and third country organizations who might claim negligence against U S contractors may seek compensation based on the higher duty of care required by U S law rather than that of the country where an incident occurs It is possible that U S firms may be held liable to the highest duty of care levels in their home or the host countries A contractor s insurance program should be flexible enough to handle claims in several different jurisdictions and provide adequate coverage for awards granted in emerging as well as developed legal jurisdictions A contractor that relies solely on an insurance policy issued in its home market to cover all of its international exposures may find that it doesn t have the coverage it thought it had when a claim arises in a foreign country or when it finds that its insurer can t pay a claim in that foreign country because it is not locally licensed For the payment of a loss to be made directly to an insured subsidiary in a given country the insurer needs to be acceptable under local law Besides the inability to pay a claim insurance companies and their insureds may risk confiscation of paid funds or treatment of the payment as income subject to local tax fines and penalties In addition some countries are applying greater scrutiny to foreign insurance coverage with an eye towards both ensuring compliance and increasing tax revenues In the event that they are determined to have improperly purchased insurance companies can face legal action fines and damage to their reputation For instance tax authorities in India recommended that the Indian subsidiary of a German multinational manufacturer be taxed on a 20 million claim paid outside of India to the parent company to compensate for damage to a warehouse in India 3 Contractors should also consider the risk of being excluded from projects because of their failure to purchase policies providing compulsory coverage from local admitted carriers where required Continuity of Coverage Across Borders For companies building or considering projects in foreign countries a proactive risk management strategy should not only address the wide range of exposures typical in a given construction project but also the impact that the differing local laws and regulations may have on the insurance coverage A contractor performing work abroad may have to obtain local insurance policies for various lines of business to cover the risks associated with its operations and to be compliant with local insurance requirements Companies also have to recognize that there may be significant differences in coverage between seemingly similar policies issued by different insurers in various countries A contractor who has a general liability policy issued locally by a U S insurer and another issued by a local insurer for a project overseas may find that there are significant coverage gaps in the two policy forms As they seek to address local issues however corporate risk managers also want to ensure that their insurance programs provide a consistent level of coverage at a competitive price across all their operations and territories From a risk management perspective while it might seem that an ideal solution would be for the contractor to arrange coverage in its home country to cover all of its operations wherever they are located around the world with the same terms conditions and limits varying national insurance laws make that approach problematic Some countries do not allow a foreign insurer not licensed in that nation to provide insurance for a foreign company doing business there Other nations may allow such non admitted insurance but in practice make it highly difficult to use or to place It s worth noting that the United States with different regulations in each of the 50 states can be one of the most complicated countries for non admitted insurance Buying insurance coverage for local risks in different countries may leave the contractor with significant differences in coverage and limits from country to country Those differences may be bridged with a global master program that provides flexibility as well as consistency and continuity of coverage around the world Such a program combines non admitted coverage where possible with local insurance that is admitted or licensed in the countries that require it along with difference in conditions DIC and difference in limits DIL coverage Building Multinational Solutions A multi national program that uses non admitted coverage can present a cost effective alternative to local coverage Such non admitted coverage is usually arranged in the parent company s home country to insure exposures in other countries Some countries however do not permit non admitted coverage while others may allow it subject to conditions such as prior approval For instance Brazil Russia India China Mexico Japan and Switzerland impose strict conditions on who they will license and permit to operate within their borders they also prohibit the purchase of coverage for local risks from non admitted insurers In restrictive countries such as these the use of non admitted policies raises the chances that a policy may be treated as void claims payments may be confiscated or that significant penalties may be levied against the claimant In Brazil insurance must be issued by a licensed company with an office in Brazil and registered with the insurance regulators 4 Japan does not permit an unlicensed insurer to conduct business without authorization In South Korea an unlicensed insurer may not conduct business except in cases where a foreign insurer sells a product that is not already sold in the market In Russia even a local broker cannot provide a service connected with the conclusion of insurance contracts on national territory on behalf of a foreign insurance company Argentina has historically prohibited non admitted insurance and potential penalties may be up to 25 times premium 5 In addition regulators in countries around the world are taking a closer look at the local operations of multinational companies These local regulators are concerned not only with whether insurers are working without a license but also how local brokers or insurance buyers are insuring local risks and whether the local operations benefit from the policy National insurance regulators also have been entering into agreements with their counterparts in other countries to help with cross border enforcement of local laws Contractors doing business in multiple countries should be aware that their global insurance programs may be subject to compliance challenges in some countries and that their compliance risk is that they could face taxes fines and reputational damage In the past the threshold question was whether non admitted insurance could be used but today companies should also consider potential changes in enforcement practices as well as evolving regulations Local Services can be Crucial Besides compliance issues companies should address issues such as how local claims will be handled and paid and which other local services they may need in the event of a claim or incident In Italy for instance claims have to be handled locally For a project in Brazil premium taxes have to be collected and paid locally In Mexico surety bonds will have to be issued by a locally admitted company Companies building projects in the European Union may want to purchase environmental coverage that responds to the demands of the European Environmental Liability Directive in order to provide proper insurance protection for potential liability associated with damage to the environment or natural resources Buying insurance coverage for local risks in different countries may leave the contractor with significant differences in coverage and limits from country to country Because foreign projects necessitate travel contractors also have to think about how they will protect their own personnel when they are working or traveling abroad Companies should consider coverage and assistance for medical and political emergencies including evacuation and relocation as well as coverage for kidnapping and extortion Because plans and local situations can change rapidly services such as web based travel management support that includes updates on security and health alerts may be a valuable addition When it comes to coverage for foreign emergencies potential complications include whether a policy issued in the home country can directly pay medical expenses for a covered employee to a hospital in a foreign country that prohibits non admitted insurance On a broader level catastrophe planning should be part of a global risk management strategy To deal with a catastrophe companies may want coverage for crisis management services that includes public relations and media outreach to help protect their reputations in the event of an incident Expert consulting advice on environmental health and safety needs for foreign projects should also be considered Training services that help to overcome language barriers may be a valuable addition to a local safety program to help ensure that a foreign project conforms to company wide safety standards and procedures 6 Public Private Partnerships may Bring New Risks Another consideration for contractors revolves around how the project is structured Typically in the United States construction projects have been driven either by the owners or the contractors and the insurance coverage reflected that through an owner or contractor controlled insurance program OCIP CCIP Today more U S projects are being structured as public private partnerships through which public projects such as roads bridges or even hospitals and schools are financed with private equity The investors are then paid back over a term of years with revenues from the project Because the structure is more common in Europe U S contractors considering projects abroad may be encountering it for the first time Such partnerships however are gaining popularity in the United States as individual states and municipalities may see it as an attractive alternative to paying for the project through tax revenue or government issued bonds For contractors public private partnerships raise questions about how risks and liabilities are apportioned among the parties In such a partnership contractors may find themselves sharing responsibility for risks that are not typically part of a standard project or with increased exposures for professional liability Merger and Acquisitions Impact Insurance Programs With the growth of the global construction economy and the growing need for the development or improvement of infrastructure in emerging economies contractors are taking on more projects in new jurisdictions This increasingly multinational approach has led to consolidation and merger and acquisition activity in the construction marketplace As U S contractors perform more work overseas they are forming new partnerships and new companies in order to execute construction activity more efficiently in local markets At the same time foreign contractors seeking opportunities in the United States may look to acquire U S companies as well As this trend continues companies also need to consolidate their insurance programs to achieve better efficiency by individual lines of business and to meet insurance requirements in different countries Local Risks Global Solution For contractors working in more than one country maintaining consistent insurance coverage across borders while controlling costs presents a number of challenges Laws vary significantly from country to country as do the local insurance markets A program that combines local policies in the countries where that is required with a controlled master policy in the home market may offer the best solution This approach helps to ensure that the appropriate coverage is there when a claim arises and that the local policy is in compliance with the country s regulations With a controlled master policy and admitted insurance from local carriers contractors potentially gain greater insight into their claims trends and an increased ability to identify locations experiencing significant losses With this information contractors will be in a better position to take corrective action and reduce losses It isn t just the varying insurance regulations and markets that should be addressed When setting up a global controlled master program contractors should evaluate the insurance carrier its experience and presence in foreign markets and its relationships with local insurers around the world The carrier should offer local expertise in international legal structures regulations and customs It should provide global servicing for local policy issuance premium collection and claims handling be able to provide local claims handling and management services where needed and offer the capability to manage and track all of a company s global insurance programs Contractors will want to work with a carrier that has deep experience in the construction industry domestically and internationally The mix of global competencies with local and industry expertise is just as crucial in a carrier as it is in the insurance program itself In the worldwide construction market it often makes sense for contractors to take advantage of opportunities in new countries While evaluating the risks and potential rewards of such projects contractors should be careful to make sure that their insurance program provides the coverage services and flexibility they need both locally and globally and that their carrier offers the right combination of expertise and breadth When it comes to international construction projects the right insurance coverage can play a crucial role in long term success Checklist for Contractors As contractors evaluate the risks associated with international projects here are some key issues that should be addressed in structuring a robust and compliant insurance program What are the options for international insurance coverage Generally there are three approaches one policy to cover the parent company and all its interests worldwide stand alone policies in each country and a single global master policy issued to the parent combined with local policies in each country Can one policy cover all risks It s possible but it s important to consider if this approach this will comply with local regulations if claims can be paid locally and if it will provide desired local services What are the advantages of admitted and non admitted insurance Non admitted insurance may offer cost savings while locally admitted policies may better address local regulatory concerns and provide more comprehensive local services It s crucial to weigh the issues that

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