By CYRIL TUOHY is managing editor of Risk & Insurance®
Corporate insurance buyers representing Fortune 500 companies with foreign subsidiaries looking to insure the subsidiaries, do yourselves and your employers a favor. Get yourselves insured locally.
I'm no insurance expert, so why even give me the time of day? Because I'm familiar with living abroad.
As the son of an expatriate foreign correspondent, as a former expatriate myself, half Swiss with half my family in Switzerland, an extended family in France and more than 18 years of real-world, on-the-ground experience living overseas, I will tell you that there's no substitute for following the local custom.
And local custom will always trump a master policy on a PDF file or Excel spreadsheet cooked up by underwriters toiling behind some U.S.-based insurance carrier firewall.
I know, I know, you can argue efficient risk transfer through a controlled master policy and all that. Fair enough.
Set aside your insurance models for a minute, though, and think not about how the world is supposed to work but how it really works, and how it works from the perspective of "boots on the ground."
Any soldier will tell you that the strategies they learned at West Point and what they encounter on the ground are often worlds a part-- so far apart that it is sometimes even a matter of life and death.
War similes aside, it's (thankfully) not quite as dramatic in insurance of course, but even in the world of risk coverage the landscape is changing rapidly.
Historically, master policies have included the parent and subsidiaries and affiliates as named insureds. Buyers would pay one premium to cover global exposures for the insured group and the master policy would cover any claims not covered by a local policy.
New regulations and tax scrutiny, however, are gradually poking holes in the master "umbrella" plans. In Argentina, Mexico, the United Kingdom and continental Europe, master policy assumptions regarding directors' and officers' (D&O), environmental coverage, and fiduciary liability are coming under challenge, not least in part because of emboldened plaintiffs' lawyers.
Absent any global regulation of insurance and the consistent application of laws, buyers are better off making sure they first have a local policy, then a master policy.
U.S.-based carriers may want to sell you and your subsidiaries a master policy emanating out of the United States, but it's the buyer's job to make sure his or her employer is insured for local risks in a faraway land, and that claims are paid.
Remember, all is insurance is local. No one knows that or should know that more than risk managers.
June 1, 2011
Copyright 2011© LRP Publications