Companies operating across multiple jurisdictions face a dual challenge: managing local risks specific to a region and global risks that affect the entire organisation. 

A company may need earthquake coverage in one country due to regional seismic activity. In another, local instability may require political risk insurance. Meanwhile, global risks, such as cybersecurity threats, impact the company’s entire operation, regardless of geography.

Companies must also navigate disparate regulatory environments with different compulsory insurance requirements, coverage limits, and exclusions dictated by local law. This complexity makes managing global risks alongside local requirements a significant challenge.

Transition to Master Programs with Locally Admitted Policies

Companies tackle these cross-jurisdictional challenges in several ways. Some simply buy discrete policies in each country where they operate. The policies don’t interact and are separately managed. 

Others secure a single multinational policy that covers their business across borders. One insurer in one jurisdiction issues the policy and provides blanket coverage under the same terms and conditions. One challenge is that the blanket coverage may only satisfy regulatory requirements in some jurisdictions where the company operates, leading to penalties or fines. 

Another more comprehensive solution is a controlled master program (CMP) with locally admitted policies. These hybrid programs provide global coverage and centralised oversight of global risks but ensure compliance with local laws by incorporating locally issued policies where required. The master program offers high-level consistency in coverage and risk management across the organisation, while local policies are tailored to meet jurisdictional requirements. Likewise, the coverages are coordinated. The local policy typically pays out first. If there’s a coverage gap, then the global policy steps in to provide coverage above local policy limits.

Challenges for Multinationals 

Many companies choose a CMP to deal with the complexity of insuring a globally dispersed workforce or supply chain, reducing the risk of being out of compliance in diverse geographies. To give you a sense of the kinds of challenges that arise in a globally dispersed work environment, here is a short list of coverage issues that multinationals typically face: 

1. Regulatory and Legal Compliance: Managing insurance laws, tax obligations, and coverage requirements in different countries can be complicated. Insurance products need to address the need for compliance with local laws, such as mandatory coverage types (e.g., workers' compensation, health insurance) and proper coordination with local insurance regulators.
2. Cross-Border Liability Coverage: With your products, services, and employees crossing borders, multinationals require insurance solutions that protect against liability in diverse legal environments. This includes general liability, product liability, and errors and omissions coverage, ensuring legal protection across jurisdictions.
3. Tax Optimsation in Global Insurance: Tax compliance and optimisation become essential as countries have different tax treatments for premiums, claims payouts, and other aspects of insurance. Multinational companies need strategies for tax-efficient insurance placements, particularly with regard to captives or reinsurance arrangements.
4. Custom Solutions for Supply Chain Resilience: Companies with global supply chains require insurance solutions that address potential disruptions. Coverage must protect against physical risks (e.g., natural disasters) and financial risks (e.g., trade credit insurance, business interruption insurance) across regulatory landscapes with unique risk profiles.
5. Global Mobility and Employee Benefits: For companies with expatriates or globally mobile workforces, employee benefit programs, including health, life, and disability insurance, must comply with local laws. Differences in employment standards and insurance requirements create challenges when it comes to developing comprehensive and compliant benefit plans.
6. Insurance Coverage for Geopolitical Risks: With supply chains and workforce operations crossing geopolitical boundaries, companies are exposed to risks from sanctions, political instability, trade restrictions, and terrorism. Global insurance placements must include political risk coverage that fits into these jurisdictions.
7. Emerging Market Risks: Companies expanding into emerging markets face new risks, including limited local insurance capacity and unfamiliar and often unstable legal frameworks. Insurance solutions must help bridge the gap, offering products that address local market needs while fitting into the company's global insurance program.

Multinational companies managing complex, geographically dispersed operations in dissimilar regulatory environments will face most, if not all, of these issues. 

Conclusion

By using a master program with locally admitted policies, companies can discreetly manage global and local risks, maintaining blanket coverage where it makes sense and tailoring coverages uniquely where required. This flexibility is crucial for protecting against cross-border liabilities that vary widely from country to country, ensuring compliance and comprehensive coverage.

Let Knightcorp Insurance Brokers help you craft your global insurance program. Share in our experience of helping multinationals secure broad coverage with locally admitted policies, and supporting clients with locally placed service teams to handle claims litigation and regulatory changes, among other issues.

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DISCLAIMER: This information is provided to assist you in understanding the risks, implications, and common considerations for your industry.  It does not constitute advice and is not complete. Please contact Knightcorp Insurance Brokers for further information.