Beware of flaws in multinational programmes
As the US economy continues to show signs of a durable recovery and the EU and US negotiate a new Transatlantic Trade and Investment Partnership, experts have warned risk managers in EU-based international companies to beware of flaws in many multinational insurance programmes that could increasingly come to the fore as trade picks up.
Specifically, a European insurer that is unlicensed in the US may not be permitted to adjust or pay a claim within the US or to remit the necessary taxes, making the cover provided ineffective.
That is the warning made in a report compiled by insurer ACE and law firm Cozen O’Connor. It also notes that unlicensed insurers that transact insurance or individuals who facilitate transactions in a non-compliant manner also put themselves at risk of fines, penalties and even the threat of criminal sanctions.
The report then provides an analysis of how multinationals can best approach insuring their US exposures as part of a compliant global insurance programme.
The US has long been the top export market for EU businesses and, once the new EU-US trade agreement is implemented, it is expected that EU companies could sell an additional €187 billion worth of goods and services to the US each year.
“There is often a perception outside the US that US compliance issues associated with multinational insurance programmes are more cut and dried than they really are,” said Suresh Krishnan, general counsel, Multinational Client Group at ACE. “Many insurance professionals outside the US continue to use a single global policy to insure US risks because they view it as a country where non-admitted insurance is ‘not prohibited’.
“Insurance managers may think the cover they have for US risks under a multinational insurance programme underwritten by a European carrier will be compliant and effective. But, whether as part of one global policy or a local policy supplemented with an excess DIC/ DIL programme, the reality can be very different.”
