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  • ACE in the U.S. - A Leading Global Insurance Organization
    parties were involved Reporting requirements for companies operating in the us are extremely wide ranging with mandatory reporting required in relation to 41 different industries Failure to properly collect data or comply with reporting requirements can result in fines The US Environmental Protection Agency EPA administers over 80 statutory civil provisions and a range of criminal offences In 2012 the EPA imposed US 252 million in criminal fines and civil penalties to deter pollution The European Union The European Union has followed the US approach in terms of introducing environmental liability that affects a wide range of industries In 2004 the environmental liability directive ELD was passed by the European Parliament and Council of Ministers to deal with the prevention and remedy of environmental damage Under the ELD companies can be held financially liable for environmental damage caused by their actions There is no cap on potential liability although unlike many other countries there is no application of the principle of joint and several liability The ELD also provides that companies are required to prevent and remedy imminent environmental damage The law covers a wide range of environmental damage including damage to protected species natural habitats water and soil and damage caused by the release of genetically modified organisms Liability can be avoided where the company has acted in accordance with conditions of authorisation by an EU member country or in accordance with the state of scientific and technical knowledge that existed at the time of the damage By 2010 each member of the EU had transposed provisions of the ELD into their own national laws However the manner in which the ELD has been transposed varies significantly between member states In addition to the ELD many EU member states have also implemented additional environmental laws at the national or sub national level For example Germany has imposed additional environmental laws on a number of industries relating to air quality waste management soil protection and noise pollution This has resulted in different regulatory systems and therefore different liability risk exposures for companies operating across EU states Australia The legal framework for environmental protection in Australia is complex with responsibility for environmental issues shared amongst the federal state and local levels of government Each state in Australia has a different environmental protection regime Since the Montara incident in 2009 there has been an increasing focus in Australia on how the marine environment may be affected by the offshore and shoreline industries Recent amendments to offshore petroleum greenhouse gas storage act amendment Compliance Measures no 2 act 2013 Cth impose an obligation on all petroleum title holders to maintain financial assurance which can be provided by way of insurance including surety bonds sufficient to demonstrate they have capacity to respond to and clean up after any pollution incident before a licence to undertake a petroleum activity will be granted There is also an extensive regulatory regime that applies specifically to Australia s mining industry particularly in Western Australia and Queensland In Western Australia new legislation has been introduced that will establish a Mining Rehabilitation Fund MRF whereby a pooled industry fund will be created to rehabilitate land affected by mining operations where the original operator does not fulfil its mine rehabilitation and closure obligations China The overall framework for China s environmental legislation is the Environmental Protection Law which was promulgated by the standing Committee of the National People s Congress NPC on 26 December 1989 The law provides basic principles general requirements and legal responsibilities for the protection of wildlife and control of pollution The Environmental Protection Law sets out three types of offences The normal category offences will result in administrative penalties If the conduct also causes damage to other enterprises and individuals the party that committed the environmental damage shall also be subject to pay compensation to the affected enterprises and individuals For the most serious offences where there is proof of wilfulness or negligence criminal liability will be triggered In accordance with Article 41 of the Environmental Protection Law an enterprise that has caused an environmental pollution hazard shall bear the obligation to eliminate it Chinese law does not specify the extent of rectification If the enterprise fails to eliminate the damage it shall face civil liability which may include cessation of the infringement restoration of original condition and elimination of dangers The environmental protection law is expected to be revised in the near future for the first time since 1989 The second draft which has been released for consultation increases public disclosure requirements ensures public participation in impact assessments and raises potential penalties In addition the Law on the Prevention and Control of Atmospheric Pollution and the Law on Environmental Impact Assessment are expected to be revised in the near future The agencies of the State Council and local governments promulgated a number of rules and regulations dealing with the management and supervision of environmental protection There have been a number of major legislative changes to environmental liability law in China in the past few years Amendment VIII issued by the Standing Committee of the NPC has been in force since 1 May 2011 Amendment VIII increases environmental liability exposures by broadening the scope of pollutants and lowering the threshold for conviction of crimes for environmental pollution In order to enforce Amendment VIII the Supreme People s Court together with the Supreme People s Procuratorate promulgated the Interpretations on Certain Issues Concerning the Application of Law in Handling Criminal Cases of Environmental Pollution which entered into force as of 19 June 2013 further regulating crimes of environmental pollution India India boasts of a very exhaustive legal framework in the area of environmental protection Under a two tiered structure policy and law is formulated by the central government and the respective state governments and implementation is carried out by several central state and local agencies and instrumentalities Until the catastrophic Bhopal gas disaster in 1984 limited attention was given to environmental issues in India by legislators the executive and the judiciary However the 1984 incident in which the leak of lethal methyl isocyanide gas claimed over 5000 lives and injured over half a million people compelled stakeholders to bring in tougher laws improve accountability and ensure better enforcement over the years jurisprudence in this area has significantly evolved particularly in light of pressure from non governmental organisations and the judiciary The Environment Protection Act 1986 is the umbrella legislation in India and is supported by specific legislation for pollution prevention and control forest conservation and wildlife protection Indian environment statutes chiefly employ a system of licensing permits environment impact assessment environmental clearances and criminal sanctions to preserve natural resources and regulate their use All enterprises whether owned by Indian residents or non residents are required to obtain statutory clearances relating to pollution control and environment protection if applicable for setting up an industrial project for over 40 categories of industries including industrial activity related to petrochemicals petroleum refineries cement thermal power plants bulk drugs fertilisers dyes paper etc there are also emission and discharge standards for several industrial activities In recent years Indian Courts have been more vigorously enforcing the polluter pays principle by heavily penalising corporations for violations and breaches launch of criminal sanctions against directors and senior management has also compelled corporations to take necessary steps for compliance risk management and mitigation Brazil The legal framework that governs environmental pollution in Brazil encompasses several infra constitutional laws and regulations the main statutes being the National Policy on the Environment the National Policy on Water Resources the National Policy for Solid Waste Oil Law New Brazilian Forestry Code and the Environmental Crimes Law The legal framework which governs environmental pollution in Brazil encompasses several infra constitutional laws and regulations Liability for environmental damage in Brazil can be assessed in three different spheres civil administrative and criminal It is worth noting that the federal state and municipal governments have concurrent competency to levy administrative fines for the same infraction at the same time The civil liability regime for damage caused to the environment or to third parties is one of joint strict liability i e the polluter and its insurer as well as any other guarantor or party involved in the pollution incident are jointly liable for damages independent of fault The recoverability of damages in Brazil is proportional to the severity of the damage pursuant to the principle of full responsibility provided under Article 944 of the Civil Code which states simply that the indemnification is measured by the extent of the damage As regards administrative liability the Environmental Crimes Law establishes that the administrative liability regime for environmental damage is also one of strict liability In the event of oil pollution the administrative penalties can vary from simple warnings to fines in total up to R 50 million approximately US 30 million per infraction in addition to the seizure of any vessel suspension of activity restriction of rights and loss or restriction of tax benefits amongst others Insofar as the criminal liability regime for environmental damage this is based on the fault of the causing agent and varies from fines to imprisonment the suspension of activities of the company in Brazil the rendering of community services funding of environmental projects contributions to environmental and cultural public entities amongst others Criminal liability can also be attributed to corporate entities in Brazil Pursuant to Brazilian law the construction installation expansion and operation of any establishment or activity that uses environmental resources and that is deemed actually or potentially polluting or capable of causing any kind of environmental degradation are subject to environmental licensing Brazilian authorities are also focusing their attention on improving the internal oil and gas legislation in order to organise the sector and protect not only the country s economy but also the environment Other emerging markets Rapid urbanisation industrialisation and intensified agricultural production and fishing in recent decades has caused severe degradation of the environment in Thailand despite over one hundred laws and more than one thousand pieces of subordinate legislation aimed at protecting its natural resources The Law Reform Commission of Thailand LRCT has a mandate to reconsider the existing legal framework with a view to recommending new laws which will be more effective at abating the continued degradation of the environment and unsustainable depletion of natural resources Time will tell what form these new laws will take Of interest public statements by members of the LRCT in early 2013 indicate a reluctance to adopt the polluter pays principle into Thai law preferring to focus on broad based stakeholder engagement 2 Most countries in the Latin American region have developed laws intended to protect land water air and natural resources adopting the polluter pays principle In Mexico Panama Colombia and Peru legislation exists which requires companies in certain industries to provide financial guarantees for environmental damage they may cause Mexico has also recently introduced legislation imposing civil liability and a requirement to pay compensation on companies that cause damage to the environment Recent Cases of Environmental Liability Montara oil spill in the Timor Sea off the coast of Western Australia 2009 On 29 August 2009 a blowout from a Montara wellhead platform in the Timor Sea off the northern coast of Western Australia resulted in an estimated 30 000 barrels of crude oil leaking into the water over a 74 day period By 3 September 2009 the Australian Maritime Safety Authority AMSA reported that the slick was 170 km from the coast of Western Australia and moving closer to the shore The slick was reported to have spread over 6 000 km2 2 300 sq miles of ocean and has been described as one of Australia s worst oil disasters The Thai state owned company PTT Exploration and Production admitted full responsibility for the incident and expressed deep regret PTTEP faced a maximum penalty of AU 1 7 million for the spill but received a discount of 25 on its fines because it entered a guilty plea to the four charges Subsequently in 2012 PTTEP was fined AU 510 000 by the Australian government for its actions in relation to the disaster a penalty intended to deter others In total the Montara oil spill is estimated to have cost PTTEP AU 319 million BP Deepwater Horizon oil spill in the Gulf of Mexico 2010 The Deepwater Horizon oil spill occurred on 20 April 2010 in the Gulf Coast of Mexico in the BP operated Macondo prospect The Deepwater horizon oil rig exploded and sank causing a sea floor oil gusher to flow for 87 days until it was capped on 15 July 2010 The total volume of the spill has been estimated at 4 9 million barrels or 780 000 m 3 and 11 lives were lost This spill is the largest marine oil spill in the history of the petroleum industry In 2012 the US Department of Justice and BP settled federal criminal charges with BP pleading guilty to 11 counts of manslaughter two misdemeanours and a felony count of lying to Congress BP also agreed to four years of government monitoring of its safety practices and ethics and the US government temporarily banned BP from new federal contracts over its lack of business integrity BP paid US 4 525 billion in the settlement in fines and other payments but further legal proceedings continue and are not expected to conclude before 2014 As at February 2013 criminal and civil settlements and payments to a trust fund had cost BP approximately US 42 2 billion In the latest installment of the Deepwater Horizon oil spill litigation the Texas Supreme Court is considering the extent to which the insurances maintained by Transocean the owner of the exploded rig naming BP as an additional insured will respond to cover BP s liabilities for the spill Toxic mine spill in Fujian China 2010 In July 2010 over 2 4 million gallons of acidic copper waste leaked from Zijin Mining s mine in Fujian China polluting the Ting River and killing 2000 metric tonnes of fish The spill was not disclosed by the company for nine days Zijin Mining was cited for seven environmental violations and was handed a criminal fine of RMB 30 million us 4 9 million for its significant environmental pollution The related officers of Zijin were sentenced to jail terms ranging from six months to three and a half years Chevron oil spill in Brazil 2011 On 8 November 2011 a 3 600 barrel leak occurred in the Frade offshore oil field which Chevron was operating in the northeast of Rio de Janeiro The Brazilian regulators said that 416 400 litres of oil leaked over the course of two weeks The National Petroleum Agency suspended Chevron s activities in Brazil until it identified the cause of the spill Several executives of the firm were also charged with crimes against the environment but these proceedings were later dismissed by a Brazilian Federal Court On 8 November 2013 Chevron agreed to pay R 95 2 million US 42 million to settle lawsuits related to the spill In addition Chevron has also paid a fine of R 42 9 million to Brazil s natural resources regulator IBAMA and R 25 6 million to the Brazilian petroleum and national gas regulator ANP according to the agreement Chemical spill in West Virginia 2014 on 9 January 2014 more than 28 000 litres 7 500 gallons of 4 methylcyclohexane methol MCHM leaked from an above ground storage tank owned by Freedom Industries into the elk river in West Virginia The quantity of MCHM released overwhelmed the water treatment plant filtration systems and West Virginia American Water issued a do not use order A state of emergency was declared with approximately 300 000 people across nine counties unable to drink bathe in cook with or wash with tap water for several days While little is known of the impact of MCHM on human health within one week of the spill more than 400 people were treated at hospitals for rashes dizziness nausea vomiting and other symptoms but none were in a serious condition On 10 January 2014 the West Virginia department of environmental protection issued a violation notice and ordered that each of freedom Industries 11 other tanks on site be emptied A federal criminal investigation has been launched as well as investigations by the US Chemical Safety and Hazard Investigation Board and the Occupational Safety and Health Administration Numerous civil proceedings have been filed against Freedom Industries and West Virginia American Water by businesses forced to close and by individuals impacted by the contaminated water On 17 January 2014 just eight days after the spill Freedom Industries filed for bankruptcy Personal Liability for Directors and Officers for Environmental Impairment In many countries there are a number of laws that expose corporate directors and officers to both civil or administrative liabilities and criminal offences The regimes are particularly complex in countries such as Australia Canada and the US In the area of environmental protection there is also a trend by legislators to enact civil and criminal offences of strict liability that is offences that are deemed to be committed by virtue of the relevant occurrence e g pollution incident alone without the need to prove intent or negligence on the part of the individual director or officer Regulators in some jurisdictions appear to be increasingly motivated to pursue individual executives for corporate wrongdoings Canada In a ground breaking case in Canada 12 former directors and officers of a publicly traded corporation have been ordered to personally fund remediation costs in circumstances where the corporation became insolvent before all remediation works were completed The case involved an aircraft parts manufacturer Northstar Aerospace Canada Inc which in 2005 had commenced voluntary remediation of a site in Cambridge Ontario and hundreds of surrounding properties which had been contaminated by chemicals that had migrated from the site The company became insolvent shortly after the Ontario

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  • ACE in the U.S. - A Leading Global Insurance Organization
    their respective cultures says Hal White Marketing Account Executive at insurance broker McGriff Siebels Williams Inc In some countries a personal accident policy can be used to fulfill a client s workers compensation needs whereas in other countries personal accident insurance is a benefit that is customarily provided to employees in those local countries As corporations become more geographically diverse these problems compound A risk manager with an office in the UK and a couple more in France and Germany isn t likely to have a problem but as a corporation extends its business into emerging markets it s more difficult to know whether or not the local insurance companies are financially sound says Mr White It may be up to the whims of the local insurance company to pay a covered claim or not Having your accident insurance with a U S rated insurer that is well known and well respected worldwide eliminates a lot of concern over how the coverage will respond Felton Little Vice President at insurance broker Aon Risk Services South recalls the unfortunate experience of a multinational client with employees in 50 countries including several emerging markets They came to us and said they had people overseas they thought were covered under workers compensation only to learn otherwise when they had to file a claim Ms Little says They ended up paying for things out of pocket when it should have been absorbed by insurance Another client endured a similar experience The corporation had employees in about 30 countries with Singapore as the home base An employee traveling outside of Singapore was injured in an accident over a weekend and a coverage question arose If they had been in Singapore it would not have been an issue Ms Little says Because it happened elsewhere it wasn t covered by the coverage placed in Singapore The problem was the difference in the coverage terms and conditions between one local insurance policy and another Our clients want to be sure they have 24 7 coverage that protects their employees no matter what country they re in and provides similar coverage to all employees Ms Little maintains The ACE Solution A Controlled Master Program absorbing global travel accident risks on a consistent worldwide basis bound by a financially strong global insurance company that mirrors the insured s geographical footprint STRATEGY 2 Comprehensive Compliance It s a small world but also a very different one from a legal and regulatory standpoint Despite ongoing actions to harmonize insurance rules globally dissimilarities remain For example some countries permit non admitted insurers to provide coverage within their boundaries while other countries will allow only locally admitted insurers to provide this coverage These distinctions come with a price In Argentina the placement of non admitted insurance can result in fines to the insured the insurer and the broker In one case the insured was fined eight times the premium paid and the insurer was fined 15 times this rate 2 In China the placement of non admitted coverage may impact an insurer s local operations and pose an execution risk to the payment of claims 3 In Japan the insured company s decisionmakers may risk imprisonment in addition to fines 4 Countries may specifically target the insured s liability In Italy if a local employee is killed or suffers a serious injury or illness due to work related causes the employer may bear the economic burden of paying a loss of future earnings to the employee s spouse It may also have to pay so called moral damages to each and every member of the employee s family including children brothers and sisters and parents 5 Pamela Enright Director of Global Benefits at insurance broker Lockton Companies says such country specific risks are a major concern of multinational risk managers and HR staff Multinational employers may have a multitude of local policies and no centralized governance strategy to manage them she explains They re diligently trying to keep track of everything around the world working with numerous local brokers and insurers But there s no easy way for them to take a top line look at all these policies to compare them Understanding all the existing regulatory issues and tracking new compliance requirements is extremely difficult Mr White concurs It s just this massive puzzle he says As a corporation extends its wings the puzzle gets more complex You try to stay on top of regulations but they re changing constantly Even within some countries the regulations differ from one locale to the next In China for instance the rules in the new Free Trade Zone in Shanghai are different than those in place in the other provinces The ACE Solution A Controlled Master Program absorbing global travel accident risks on a consistent worldwide basis bound by a financially strong global insurance company that mirrors the insured s geographical footprint STRATEGY 3 A Centralized Single Source of Information A multinational corporation with dozens of operations worldwide can easily have hundreds of insurance policies covering diverse exposures Each policy becomes effective and expires on a particular date Managing the renewals is a complex task for risk managers Any failure to stay on top of this responsibility and the corporation could risk a claim for which it is uninsured It s a major headache for them all these policies expiring and renewing through the year says Ms Serra Nagrath from Wells Fargo Insurance She cites the past experience of a client with a broad global presence dealing with so many local insurers that it had a hodgepodge of renewal dates Some regulators required the insured to provide the insurer with a 90 day written notice that they planned to renew with that insurer while others required 120 days Ms Serra Nagrath notes Some had no requirement whatsoever When the client came to her to solve the problem it took Serra Nagrath 18 months to get all the local insurance policies to renew on the same

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  • ACE in the U.S. - A Leading Global Insurance Organization
    property and casualty exposures This solution focuses on five key strategies to consider when evaluating present day global Accident Health A H insurance plans Introduction Today business travel is an integral part of the day job for many employees As companies expand into overseas markets a wider cohort of staff is spending time away from home What s more as businesses increasingly seek revenue growth outside their struggling home economies traveller destinations are becoming increasingly exotic Managers are as likely to find themselves in Bangalore Bogota or Beijing as in London or Los Angeles For an insurance or benefits manager or head of security at any multinational company one of the most difficult challenges is managing sensitively and effectively a situation in which employees travelling in a foreign country on business become sick find them selves in potentially dangerous situations or need evacuation from a politically unstable country ACE s research shows that many businesses are waking up to the risks When we surveyed over 600 European companies last year for example over half concluded that the level of business travel risk their company faces will grow over the next five years Indeed a quarter of them think it will increase significantly This makes business travel one of the three fastest growing emerging risk concerns for European companies from our study In addition to handling the immediate crisis managers will have to be prepared to explain to senior leadership the steps the company will take to keep employees safe A crucial part of that response will be making sure that the company s insurance programme provides the necessary coverage and resources Businesses have often relied on a single global insurance policy issued to the parent company to protect all of its employees world wide In some countries however insurance regulations can undermine the effectiveness of this approach opening the door to problems with benefits and claims payments The question then becomes whether in practice the policy will actually deliver on the promise of worldwide insurance protection and address any potential fiscal challenges including various tax and regulatory consequences In many cases a single policy based in a company s home market may not be enough A more prudent approach may be to combine an insurance policy issued to the parent company in its home jurisdiction with local policies issued to its subsidiaries in the countries in which they operate Benefits Evolution The patterns of European business travel have changed significantly in recent years Where companies continue to send employees on long term assignments as expatriates today it is much more common for executives to travel over several weeks to multiple destinations These business travellers are typically the company s top talent leading sales executives and other high value employees Increasingly they are travelling to emerging countries in Asia South America the Middle East and Africa and may be joined by colleagues from those markets to travel to other countries as part of the same business trip However in these emerging

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  • ACE in the U.S. - A Leading Global Insurance Organization
    to categorically ensure that the terms of each local policy are consistent with the terms of all of the other policies including the master policy issued as part of the programme Additionally given the significant number of countries and policies often involved in multinational programmes limits offered on the local policies may aggregate to an amount larger than a single insurer or group would be willing to underwrite For example policies insuring 100 affiliates with an average limit of AU 10 million would result in aggregate exposure of AU 1 billion a sum which is likely to far exceed the parent company s insurance needs for its worldwide operations and which will impose unacceptable costs Multinational insurers have typically fulfilled the parent company s request for worldwide coverage and consistent limits by offering the parent a master broadform policy These policies are intended to operate excess of and in addition to the local policies insuring the parent s foreign subsidiaries affiliates and joint ventures by filling any coverage gaps of the local policies Differences in Condition DIC and to provide consistent limits Differences in Limit DIL However the underlying expectation within this framework is that in exchange for a single premium the global exposures of the whole multinational enterprise will be covered and where the risk is not covered by a local policy this would be covered by the local insured s claim against the master policy and paid in the local country where the claim arose A Changing Regulatory Environment Recent specific regulatory developments as well as a general trend towards increased regulatory and tax scrutiny have cast serious doubt on the ability of master policies with broad form named insured clauses to satisfy their original objectives Since the landmark decision of Kvaerner plc v Staatssecretaris van Financiën 1 the insurance industry has been left in no doubt that increased interest and scrutiny in revenue generated from premium taxes and other parafiscal charges in the multinational risk arena is likely to become more commonplace even in those countries where insurance arrangements had not been the subject of tight regulation Routine audits of insureds in many countries most recently the tax audit of a European multinational s Indian affiliate as reported in the Wall Street Journal in March 2011 2 and an understanding of how global multinational programmes are currently structured will make the availability of this revenue apparent where it has not been remitted to revenue authorities In light of these matters a closer analysis of the structure and implementation of multinational programmes is necessary in an effort to ensure that regulatory and tax risks are not inadvertently assumed by insureds insurance brokers and insurers so that the various participants understand their respective obligations to comply with local insurance and tax laws in the various jurisdictions implicated by the programme Insurable Interest A Prudent and Reasonable Solution What might be an effective solution for multinational companies that are headquartered in one jurisdiction may not work for companies in other jurisdictions However removing from the master policy coverage of a parent company s subsidiaries affiliates and joint ventures located in jurisdictions that are restrictive to non admitted insurance as additional insureds will significantly reduce the risk that the insured under a master policy will be deemed by the local regulator to have improperly procured non admitted insurance without satisfying local conditions governing the procurement of such insurance and that the insurer has somehow conducted insurance business by directly insuring risks in those jurisdictions Accordingly simplifying the master policy and its broadform coverage is an important and prudent first step in designing a global programme that may withstand international regulatory and tax scrutiny An important element of this approach is to rely upon the basic legal concepts of insurable interest or economic and pecuniary interest under Australian Singaporean and Hong Kong law As described below the insurable interest approach enables coverage and terms to be provided that are substantially similar to current broadform master policies while mitigating the risk to insureds brokers and insurers of being deemed to be participating in unauthorized insurance business a Australia Under Australian law the policyholder must have a sufficient pecuniary or economic interest in the subject matter of the insurance to support a valid and enforceable policy Although Australian law does not recognise a parent as holding such an interest in the physical assets of its subsidiaries affiliates and joint ventures it is generally accepted that a parent company does have an insurable interest in its financial interest in those entities The effect of Australia s Insurance Contracts Act according to Dean Carrigan a partner at Clyde Co in Sydney is that the pecuniary or economic loss is not necessarily limited to the value of a parent s shareholding or dividends For example where a parent is a shareholder in its subsidiary but also has an obligation to arrange insurance for that subsidiary s property the parent s pecuniary or economic loss as a result of the property being damaged or destroyed can be made referable to the value of the loss to the damaged or destroyed property for which the parent is obliged to arrange insurance This concept is equally applicable to a liability exposure that takes the form of casualty or professional liability b Singapore Hong Kong Malaysia and New Zealand In Singapore and in Hong Kong although there is no settled legal insurable interest requirement for non life or non marine policies insurable interest is deemed to exist if the policyholder a has legal or equitable title to the subject matter b is in possession of the subject matter or c is not in possession of the subject matter but may be either responsible for or suffer loss in the event of any damage to the subject matter 3 Under both Singapore and Hong Kong law according to Simon McConnell a partner at Clyde Co s Hong Kong office legal obligations include any legal or contractual indemnity from the parent to its

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  • ACE in the U.S. - A Leading Global Insurance Organization
    US risk The Multinational Challenge At the simplest level the laws of many jurisdictions worldwide specify that a risk can be exported overseas only if there is no local capacity available Various conditions some more onerous than others are then often applied as to which lines or classes of business can be exported whether a local broker is required for placement or is expressly prohibited from the process whether the insured has to make representations about local capacity or local terms and conditions and what those are and whether and by whom premium taxes are to be remitted in respect of the risk Therefore even though multinational programmes are frequently negotiated and placed centrally with the cost of the insurance shared or allocated to those insured in various jurisdictions a more appropriate analysis when designing one is to look at the export process itself Any analysis should consider whether the right protocols are followed to export local risk and not just whether the carrier itself can lawfully insure such risk Any analysis should consider whether the right protocols are followed to export local risk and not just whether the carrier itself can lawfully insure such risk In setting out various rules on this subject US law is not dissimilar to that of many other markets in its approach Brazil Canada and from July 2013 Colombia are all examples of countries with rules specifically addressing the export of local risk to an unlicensed insurer 2 In practice many insurers and brokers offering multinational programmes tend to take one of three approaches towards multinational insurance Option 1 Place coverage in an entirely centralized fashion through the purchase of a single policy in the multinational s home country covering the parent its subsidiaries joint ventures and its interests anywhere in the world Option 2 Completely decentralize the insurance programme by purchasing insurance through individual stand alone policies in each country where there is exposure with appropriate localized coverage grants and limits Option 3 Purchase a single global master insurance policy issued to the parent company of the multinational together with local policies for the parent s subsidiaries and joint ventures in each country where there is exposure The master policy is intended to fill coverage gaps in the local policies and provide consistency to worldwide terms and conditions also known as Differences in Condition DIC or Differences in Limit DIL insurance In respect of multinationals with risks located in the US the key question is whether the insurance policy procured by the parent in their overseas jurisdiction may effectively and compliantly pay claims where the risk is located in the US and whether applicable taxes on the premium are calculated collected and remitted in compliance with US state and federal law From a regulatory perspective the US is not one single market with a homogeneous approach to insurance law Therefore taking a formulaic approach is simplistic at best but may be misleading at worst because it may underestimate the utility and benefits of local US policies to the detriment of the local US broker or the local US insured itself Insurance Regulation in the US Two levels of regulation The US has one of the most sophisticated regulatory regimes overseeing the purchase and execution of cross border insurance It regulates cross border insurance on two levels historically and primarily at the state level and increasingly also in the context of the embryonic development of federal oversight State level All the 50 states and the District of Columbia regulate the business of insurance within their own jurisdiction The regulation of insurance transactions in the US has two primary drivers First the solvency of persons providing insurance and the manner and fairness in how insurers and insurance producers treat consumers of insurance and Second the generation of revenue for the state through taxes on insurance transactions Almost all states expressly permit an unlicensed insurer to insure local risks provided that the unlicensed insurer does not transact insurance business in those states without authorization The local risk may be exported to the non admitted market through a special broker a surplus lines broker or directly to an unlicensed insurer under either direct procurement rules or where a sophisticated insured is permitted to access the unlicensed insurer without a broker While great progress has been made to harmonize state regulation of insurance state insurance laws and regulations and how they are enforced continue to vary and are subject to change from time to time A non US multinational company should therefore view the 50 states as separate sovereign and independent of one another when regulating insurance From a multinational perspective a non US multinational company should therefore view the 50 states as separate sovereign and independent of one another when regulating insurance In order to actively sell insurance in the US insurance companies generally must be licensed or otherwise authorized to transact insurance business However from the perspective of a US subsidiary of a non US multinational purchasing insurance from an unlicensed insurer the regulation and placement of risks with a non admitted insurer will be addressed by the export rules Much of the obligation of facilitating the placement of the insurance and the remittance of taxes and fees therefore almost always falls on the local US broker or the local US insured rather than the non admitted insurer itself Federal level At the federal level the Nonadmitted and Reinsurance Reform Act NRRA includes several provisions impacting on the regulation and taxation of non admitted insurance placements These are discussed in more detail below and they are by and large specifically designed to streamline and coordinate states taxation of insurance premiums covering US risks insured with an insurance company that is not authorized to conduct business in the state where the risk is located Transacting Versus Exporting Transacting insurance business One of the key means of regulating insurance is the requirement that persons transacting the business of insurance in a state obtain a license 3 California provides

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  • ACE in the U.S. - A Leading Global Insurance Organization
    risk managers expect to increase their use of multinational insurance programmes over the next three years In addition to traditional risk areas such as property and casualty this report highlights a trend among risk managers towards managing specialist and emerging exposures within a multinational programme structure This is a trend we are certainly seeing at ACE from business travel and group personal accident risk to directors and officers and environmental liability Our research also points to some specific areas for improvement Fewer than 30 of risk managers are currently very satisfied with overall service levels from their insurer in respect of their multinational programmes Fewer still are very satisfied with claims performance surely the acid test of any insurance programme insurer responsiveness to their budgetary pressures consistency of coverage and availability of effective technology solutions All of these are areas where ACE continues to invest in building out its multinational proposition and our recent launch of a new Global Accounts division highlights our focus on providing a consistent and client focused service wherever a corporation is based Ultimately we also 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

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  • ACE in the U.S. - A Leading Global Insurance Organization
    to catastrophe management as well as compliant insurance coverage from an insurance company experienced in managing risks around the world A catastrophe that is managed properly can even enhance a company s reputation as a responsible member of the business community Specialized A Perfect Storm January 2015 Specialized Maritime transport is seeing a higher concentration of values in current container ships a rising complexity of salvage operations and increasing supply chain risks Together these raise many issues for shippers shipowners and the insurance industry and have the makings of a perfect storm Overview One of the areas in need of significant investment is energy whether it is replacing aging energy infrastructure meeting growing demand or tackling the threat of climate change The International Energy Agency estimated that 48 trillion of investment in energy supply and efficiency is needed worldwide by 2035 or 53 trillion if climate change targets are to be met 2 Even mature markets like North America require huge investment to replace old pipelines and power grids as well as to build new infrastructure to keep pace with expected increases in domestic oil and natural gas production More than 640 billion of energy infrastructure investment will be needed in the U S over the next two decades says the Interstate Natural Gas Association of America 3 Latin America is already in the midst of an infrastructure investment boom with economic growth and market liberalization boosting investment Mexico alone has outlined infrastructure investment plans worth 300 billion over the next six years while Brazil s government and private sector plan to invest 414 billion in infrastructure through 2018 The Role of Surety Despite the clear need for increases in infrastructure investment governments have been challenged to find the necessary funds prompting the need for new funding solutions and an increased role for the private sector Whether funded by government or the private sector the increase in infrastructure development will heighten the role of surety insurance which protects governments and investors against the inability of contractors to meet their obligations Growing global demand for energy requires increasing levels of investment In the long run we expect to see greater use of surety insurance for infrastructure investment says Stephen Haney Division President of surety at ACE USA and Chief Underwriting Officer Global Surety ACE Surety Growing global demand for energy combined with concerns for energy security as well as the environment requires increasing levels of investment in the sector Surety insurance is commonly purchased by developers and contractors involved with large government funded infrastructure projects It protects beneficiaries from the failure of a contractor to complete a project on time and or within budget either due to insolvency or unforeseen events such as natural disaster labor disputes or problems sourcing materials Surety insurers also pre qualify contracts a process that flags potential risks of delays to ensure that projects are economically viable and that investors are protected For some infrastructure developments like government contracts developers will only be able to take

    Original URL path: http://acegroup.acegroupaccess.com/ace-perspectives/specialized-risk/featured-using-surety-to-facilitate-infrastructure-investment.aspx (2016-02-13)
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  • ACE in the U.S. - A Leading Global Insurance Organization
    and where permitted pays locally This is combined with local policies in those countries where the master policy insurer has no presence is not licensed as an unlicensed insurer may not be able to pay a claim without the claim payment being questioned by local regulators or where there are adverse fiscal consequences to the local claimant insured or local broker Due to differences in local policy language availability of certain coverage grants or adequacy of local limits it is customary to set the master with difference in conditions difference in limits DIC DIL provision above a combination of local policies or any self insured retention This DIC DIL policy fills the gaps between the local cover and the master policy both as to applicable limits and different aspects of cover dictated by the liabilities created by the local legal regime or the differing terms of the local policies Location and insurable risk For payment of a loss to be made directly to the insured subsidiary located where that loss occurs the insurance needs to be compliant If it is not problems arise ranging through inability to pay at all confiscation of paid funds or treatment of the payment as income subject to local tax fines and penalties Insurable interest On the other hand the insurer can only pay a loss under a policy to a party having an insurable and insured interest Many jurisdictions accept a parent company s insurable interest in its own financial stake in its affiliates Under this approach payment of a claim other than any part insured under a local policy is made to the parent under a policy issued to it and compliant in its country of domicile While there is general confidence in the effectiveness of insurable interest clauses in the US UK and Europe it is possible that a local regulator could challenge the authenticity of any re capitalisation by a parent In addition parties considering doing business with a local subsidiary may wish to see evidence of its own compliant insurance cover Lessons learned There are no perfect solutions However adopting a considered and holistic approach will help to address them as fully as possible This should understand and address the specific needs of the multinational and its subsidiaries reflect the risk profile of the business in all its locations including the extent to which they give rise to the sorts of issues outlined above be engineered between the risk management function of the insured and an insurer capable of matching these requirements in full where reliance is placed upon insurable interest provisions ensure that the group legal treasury and tax function fully understands the practicalities of how it is to work Challenges and Solutions When Structuring a Multinational Programme for Marine Insurance Introduction and an example It is easy to understand that a German company with a subsidiary based in Thailand whose factory is flooded could run into a variety of the kinds of problems outlined in our introduction But what happens for example where the loss is to goods shipped by the Thai subsidiary to a purchaser in Australia and the goods suffer damage at some indeterminate point in a voyage which may include modes of transport other than purely carriage by sea Questions we need to ask include What is the location of the loss Where is the insured located Who has an insurable interest Where should payment of the loss be made and to whom Against whom and where should rights of subrogation be pursued The evolution of marine insurance law and practice Marine insurance already answers many of the questions facing contemporary global programmes except perhaps that of compliance in today s rapidly evolving regulatory environment For example in England centuries of case law were codified into the Marine Insurance Act 1906 legislation that has been substantially replicated in common law jurisdictions around the world An international law of the sea has also developed based around codes conventions arbitration models contract forms rules for establishment of the law and jurisdiction and recognition of principles of ownership and contract liability Almost every jurisdiction in the world is a signatory to one or other of The Hague Hague Visby or Hamburg 6 Rules Carriage documentation and in particular the combination of bills of lading and charter parties has the role of representing both evidence of the terms of the contract of carriage and of title Closely linked to this is the principle that the parties can agree at whose risk goods are to be shipped i e the consignor sender or the consignee receiver and therefore who procures the insurance Title to the goods may change hands more than once during the voyage with the result that the ownership of risk also changes and policy or recovery claims may arise between parties many stages removed from those who were parties to the original contract International Commercial Terms Incoterms internationally recognised standard trade terms used in sales contracts have been developed in response In addition legal practice has responded for example by permitting claiming cargo interests to be identified as a class 7 While these issues may have greater resonance in relation to arms length buyer seller transactions they do not cease to be relevant in inter multinational group transactions Marine cover today As purchased from an insurer typical marine cover today may include loss or damage whilst loading on to and unloading from the carrying conveyance control of the salvage or disposal of their own branded goods buyers and or sellers contingent interest thus addressing certain areas of uncertainty as to insurable interest and covering off the alternatives delayed discovery of concealed damage increase in the value of goods due to the imposition of duty full payment of general average or salvage charges costs for the removal of debris In addition specialist knowledge and cover is likely to be required for specific types of cargo such as refrigerated or temperature sensitive cargo pharmaceutical products high value consumer and

    Original URL path: http://acegroup.acegroupaccess.com/ace-perspectives/multinational-risk/structuring-multinational-programmes-marine.aspx (2016-02-13)
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