Multinational Insurance programmes...France Ana has been responsible for the implementation and management of Multinational Programmes, both Imports and Exports, in Continental Europe

Multinational Insurance programmesChubb ‘MasterClass’

Ana Thomas

Your speakers

Global Services Leader, Continental Europe, Chubb

Ana Coutinho Thomas has more than 10 years experience in the field of multinational insurance programmes providing expertise and service to the most demanding clients, having worked in Brazil, the United States and France, as a broker at Marsh and since 2013 at Chubb. Originally in charge of the Multinational Service Unit for France Ana has been responsible for the implementation and management of Multinational Programmes, both Imports and Exports, in Continental Europe since 2016.

Chubb Multinational Masterclass - Brussels - March 16 2017

Rémy Massol

Your speakers

Multinational Director, Continental EuropeChubb

Rémy has 20+ years experience in the insurance industry, mostly in the major accounts, multinational programmes structuring and alternative risk transfer areas. He has worked in Brussels, New York and Paris. He joined Chubb (previously ACE) in 2011 to create and lead the multinational practice for Continental Europe established to develop the portfolio of multinational programmes by providing expertise, establishing best practices and supporting sales efforts. Prior to Chubb, he spent most of his career with AIG, where he was most recently heading captive fronting activity for Continental Europe.

Lisa Smits

Your speakers

Global Services Team Leader, Outwards, BeneluxChubb

Lisa Smits is Global Services Team Leader, Outwards for the Benelux and is based in Rotterdam. Her team is responsible for implementing, servicing and managing all multinational programs written from Belgium, Luxembourg and the Netherlands for all lines of business.

Her international oriented education gave her the opportunity to work/study in the United States, Luxembourg, Belgium, Finland and Taiwan. After completing her Master in International Business she joined Chubb in 2013 combining her passion for international business and insurance by specializing in multinational insurance programs.


1 Possible options to cover foreign exposures

2 Multinational Master programme: how does it work?

3 Non-admitted, FOS, DIC-DIL and FINC : let’s demystify all that!

4 What to know before implementing a programme

5 Key countries: what to watch for?

…a fewquestions

1 client: ACS in Belgium

1 broker: you

1 foreign country: Russia

1 World Cup in 2018


1. Foreign exposures:possible options

England

Switzerland

Singapore

FranceHome office

a simple example…

…3 possible options


1. Decentralised approach: one policy issued in each country

French policy

Local policyLocal policy Local policy

Insurer X Insurer X Insurer X

ABC SA. Insurance Company

concept of ‘non integrated’ local policies

Insurer Y Insurer Z

1. Decentralised approach: one policy issued in each country

• Cover matches local needs. Compliant with

local rules

• Policy matches local market practices and

complies with insurance law

• Policy written in local language

• Limit, deductibles and premium in local

currency

• Claims settlement made locally by the insurer

• Heavy coordination, lack of control and visibility for the home office, lack of consistency of cover between countries

• Local available coverages may be insufficient according to home office vision

• Policy can’t read by Risk Manager because of language

• No control over costs, and no possible cost savings

• Less possibility to intervene from home office in case of detrimental local claim settlement


Single policy



2. Global approach: single policy covering the world

‘admitted’ and ‘non admitted’ concepts

2. Global approach: single policy covering the world

• Very simple to implement

• Policy in home office language

• Total control from home office insurer

• Policy terms and conditions matches Risk

Manager’s needs

• FOS and non admitted coverage maybe

authorized but are not always appropriate

• May be difficult to settle claims locally

• Risk of non complying with local insurance and tax obligations

• Lack of transparency in terms of social responsibility

• Not permitted in many countries


Singapore

Brazil

FranceABC Assuranced SA

‘non-admitted’ insurance…

‘non-admitted’ prohibited

‘non-admitted’ authorised

cover provided by the home office policy

‘non admitted’ insurance: how does it work ?

• Freedom of services (‘FOS’)• Non admitted prohibited• Non admitted authorised• Non admitted authorised under conditions

main categories

• Authorisation is different between states/provinces• Client and broker involvement in placing the policy• Complexity regarding tax calculation and remittances and claim

indemnity payment

non admitted authorised:

under what conditions

• Impossibility to indemnify a claim locally• Criminal, fiscal risks and reputation impact• No access to local pools

non admitted prohibited:

implications

• Local policy deployment in sync with local exposure• Financial interest clause (FINC / FEL)• More suitable approach for risks that affect the home office rather than

the local entities

non admitted prohibited:

mitigate the risk


let’s look at the quiz again

Russia does not allow non-admitted insurance

Russia exposure covered by property policy issued in Belgium

Paying taxes for something that you’re not allowed to do?

�

Question 1

correct incorrect

Russia subsidiary to pay premium tax on policy issued in Belgium

�

Question 2

correct incorrect

let’s look at the quiz again

If an assistance provider is involved, as this would not qualify as an insurance transaction

Medical expense & repatriation cost for employee paid from Belgium policy

�

Question 3

correct incorrect


3. Multinational programme: Master Policy + local policies

French policy


Insurer X Insurer X Insurer X


concept of ‘integrated’ local policies

ABC Insurance Cy (Swiss)

ABC Insurance Cy (Singapore)

ABC Insurance Cy Ltd.

3. Multinational programme: Master Policy + local policies

• A unique counterpart at the insurance company

in the home office country: programme

management simplicity

• Good control and visibility for the home office,

and cover consistency

• Local policies in local language

• Legal and tax local compliance

• Claim settlement is made locally

• Access to local pools

• Implementation and control of centralized risk

prevention

• Requires a strong coordination between client-broker-insurer

• Requires an insurer with a solid expertise and network

• Programme management is heavier for insurer and broker, but simpler for client

• Costs: local fronting costs, reinsurance taxes

• Specific countries are subject to local quotation or tariff


2. Master programme: how does it work?

Month XX, 2016Ana Thomas and Rémy Massol

Angleterre

Suisse

Singapour

FranceSiège Social

The best option for our client?

3:

2:

Decentralised approach:one policy issued in each country1:

Global approach:single policy covering the world

Multinational programme: Master Policy + local policies


Location of Risk & Licencing

The fundamental questions that must be answered.

?

� =

Where is the risk ?1

Is the insurance company underwriting the risk, allowed to cover risks in that country ?2

=

Location of Risk rules

The country in which the property is situated, including contents if covered under the same policy

The country (normally) where the insured has a permanent establishment or is resident.

Property

Marine Cargo

TravelThe country where the insured is resident. EU: if cover is 4 months or less: where the policyholder took out the policy.

The country where the entity is domiciled or where it has a permanent establishment.Liability

Definitions are harmonised across EU:


A question for you:

Which risk can not be covered from Belgium?

1The product liability risk of a Belgian company exporting products to China.

2 The political risk of a Belgian company investing in Russia

3The liability risk of a Belgian company do clinical trials in South Africa.

4The contingent business interruption risk of a Belgian company following a fire at a supplier’s plant in India.

�

The 3 key items to consider with the insured and broker

� certificates, policy language, …

� impossibility to provide insurance certificates => which consequences for the client ?

� obligations linked to commercial contracts => lease, sales agreement, etc

� where is the loss adjustment supposed to take place ?

� partial loss => what about repair costs of the location?

Proof of insurance

Where are claims expected to be paid?

Non admitted

� a simple question ‘can we cover this risk in country X non-admitted?’

� not a simple answer…….


3:

2:

Need of a local policy1:

Countries covered under the Master

Countries covered locally

‘check list’ : 3 steps

What are the options for the client?

Cover from the French Master Policy?

Cover from a local policy

? ? ?

? ? ?



Cover from the French Master Policy?� as non-admitted

� as Freedom Of Services

Cover from a local policy

��

��

��

‘Freedom of Services’ (FOS)

• Policy is written in home country language

(translation is not mandatory)

• Cover matches risk manager’s needs

• A single policy: simpler administration

• Claim settlement is simple

• No local fronting costs

• Local client may need a policy in their own language, or adapted to specific requirements

• Communication problems due to language, legislation and market practices, particularly during claim investigation

• Access to some pools may not be possible under FOS

What is it?

Ability for an insurer located in the European Economic Area (EU plus Iceland, Liechtenstein and

Norway) and benefiting from necessary licenses to cover under one single policy risks from other EEA

countries.



access to pools, local needs,…)

Cover from the French Master Policy?� as non-admitted

� as Freedom Of Services

Cover from a local policy� is it possible ?

� and is it necessary ? (certificates, claims handling,

� must it be integrated?

� what level of limit, extent of cover, premium, ….

��

��

��

� � �

? ? ?? ? ?? ? ?

Including a DIC / DIL ‘concept’

One Master Policy:

� insured : home office + subsidiaries

� wording : large / bespoke

� limit : high

The ‘Controlled Master Program’ concept

Several local policies:

� insured : subsidiaries

� wording: ‘best local standard’

� limit : based on local needs


…morequestions

1 client: ACS in Belgium

1 broker: you

1 foreign country: Russia

1 World Cup in 2018

3. DIC-DIL and FINC : let’s demystify all that!


The Master policy ‘DIC / DIL’ clause

DIC : ‘Difference In conditions’

DIL : ‘Difference In Limit’

The DIC / DIL clause intends to cover from the Master policy any gaps in coverage that

may exist between the local policies and the Master policy.

DIC DIL

Country B policy

Country D policy Country E

policyCountry C

policy

Police Pays A

Country A policy

How does ‘DIC / DIL’ work

Local Policy

Peril A

Peril B

Peril C

Peril D

Master Policy

Peril A

Peril B

Peril C

Peril D

limit10

limit100

DIC

DIL

�

�

�

�

�

�

�

�

�

�


‘DIC / DIL’ : example 1

Local Policy

Peril A

Peril B

Peril C

Peril D

Master Policy

Peril A

Peril B

Peril C

Peril D

Claim payment :

limit10

limit100

DIC

DIL

6

Example 1 : claims under the local policyPeril CAmount : 6m

+ 0 = 6

�

�

�

�

�

�

�

�

�

�


Local Policy

Peril A

Peril B

Peril C

Peril D

Master Policy

Peril A

Peril B

Peril C

Peril D

Claim payment :

limit10

limit100

DIC

DIL

10

Example 2 : claims under the local policyPeril CAmount: 6m 15mx

+ 5 = 15

�

�

�

�

�

�

�

�

�

�



Local Policy

Peril A

Peril B

Peril C

Peril D

Master Policy

Peril A

Peril B

Peril C

Peril D

Claim payment :

limit10

limit100

DIC

DIL

0

Example 3 : claims under the local policyPeril C DAmount: 6m

+ 6 = 6

x

�

�

�

�

�

�

�

�

�

�

DIC/DIL can not provide cover in Russia as non admitted is not allowed

RUB100m loss occurs in Russia

�

Question 4

RUB100m paid to ACS Belgium

RUB100m paid to ACS Russia(60m Russia policy + 40m Belgium DIC/DIL)

RUB60m paid to ACS Russia (Russia policy)RUB40m paid to ACS Belgium (Belgium DIC/DIL)


Where Controlled Master Programmes don’t quite work!

DIC/DIL clause and the principle of ‘non admitted’ insurance

� Claim settlement made to the locale entity?

� Claim settlement made to parent company?

� DIC/DIL cover granted to local entities : beware of local ‘non admitted’ rules !

One of the few example in the public domain….

Local Policy

DIC / DIL Master Policy

Quotation from Wall Street Journal article

�

�

The entire scheme of things appears

to be arranged by the Adidas group in

such a way so as to evade paying taxes on

this amount in India.

(…) "

…… …… …… …… …. ..…

…… …. ……….. ……… … ………… …… ….

…… …. ……….. ………. ….. ….… … ………… …… ….

…… …. ……….. ……… … ………… …. … .… …… ….

" the tax department said in its internal report.


the ‘financial interest’ concept

Observation (when insuring on a non admitted basis): � if a local entity is not covered locally, or not sufficiently covered,

� since Master policy insurer can not indemnify local entity,

� parent company suffers a financial loss

‘Financial Interest’ clause (FINC)or‘Foreign Entity Loss’ endorsement (FEL)

Solution within the Master policy: � Definition for ‘insured’ does not include local entities located in territories where

non admitted is not permitted

AND

� Master policy indirectly provides an indemnity via the coverage of the financial interest of the parent company in the local entity

DIC/DIL can not provide cover in Russia as non admitted is not allowed

If Financial Interest : how parent company can transfer funds to the widow ?

Death benefit of Russian employee on business travel in Europe paid to

family in Moscow

�

Question 5

correct incorrect


4. What to know before implementing a programme

5. Key countries: what to watch for?

Cash before cover / Policy before cover

� Asia : Japan, South Korea, India, China (in some provinces)

� Europe : Ukraine, Georgia

� Africa: CIMA code countries

� Russia

� Egypt

� Vietnam

� Brazil

� Mexico

Cash before cover

Policy before cover

Short issuance / payment delay


Local retention and exportability

What is the impact on the program?

Which risks are concerned?

Few examples:

• Africa: local retention mandatory in most countries

• State Reinsurer: Morocco, Algeria

• Local market protection : Brazil, Argentina, India, China

• Prohibition of fronting: Italy

• Pools: TRIA (USA), Pool Re (UK)

Main tariff rated countries

Malaysia

Minimum rates are compulsory depending on size of local risk

Indonesia

Tariff rated for flood, earthquake and Flexa perils

Turkey

Rates, conditions and deductibles mandatory for earthquake coverage

United States

Rate and conditions submitted to local regulation depending on size, location, premium, deductible and coverages required (such as earthquake or flood)

Switzerland

Minimum compulsory rates for ‘elementar perils’ applicable on buildings and contents according to the canton and specific deductible also applicable


Main pools

Spain / France Terrorism + Cat Nat

Mandatory Pool

United Kingdom Terrorism

Facultative coverage but Pool participation is mandatory

United States Terrorism

Facultative coverage but proposal for the insured is mandatory

Applicable to CGL, Property and Marine policies (S&T)

Australia Terrorism

Mandatory Pool

Norway Cat Nat

Mandatory Pool

One programme… multiple questions!

� Non admitted regulation at national and regional level (ex: US, Canada)

� Cash before cover

� Compulsory insurance

� Flexibility in use of local brokers

� Local retention & exportability

� Filed forms

� Tariff rated countries: Malaysia, Turkey…

� International sanctions (USA (OFAC), UK, UE)

� Compulsory Pools : Terrorism, Natural Disasters

� Possibility of central premium collection

� Local fronting fees (insurer, partners)

� Minimum premiums

� Local market practice (ex: tacit renewal)


Local Market Practice

Commercial General Liability:

� Employer’s Liability

� Tenant’s Liability

� Claims made or occurrence

� Deductibles applicable on bodily injury

Property and Business Interruption:

� Tenant’s Liability

� BI extensions

� Waive of coinsurance clause

� Pools, tariffs and mandatory coverages

Marine / Construction:

� International clauses

� Pools and tariffs

� Measures for protection / prevention

� Extensions specific to local markets

Business Travel:

� Wording varies largely across countries

� Assistance coverages

� Extensions for family and private trips

Good Local Standard

…a finalquestion!


Documents

Multinational Insurance programmes...France Ana has been responsible for the implementation and management of Multinational Programmes, both Imports and Exports, in Continental Europe