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Embrace insurance complexity when operating abroad: Summit panelists

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NEW YORK — The extent to which it is possible for multinational companies to assemble a global insurance program that satisfies compliance obligations in all relevant jurisdictions is largely a matter of perspective, experts say.

Globalization has brought much greater complexity to the issue of insurance compliance, with new foreign markets not only coming into play economically, but also developing their own insurance regulations and insurance markets, a panel of global insurance experts said Wednesday during Business Insurance's 2014 Risk Management Summit in New York.

“It's clear that each country has its own cultural identity, legal system and insurance legislation,” said Tim Yeates, executive director of London-based Axco Insurance Information Services Ltd. “Companies need to embrace that complexity. You're likely to encounter uncertainty, particularly where new legislation is passed and there's no supporting jurisprudence.”

Panelists outlined a range of factors companies should review with the help of their brokers, general counsel and other third-party advisers when contemplating their insurance needs abroad to better ensure both the legality and responsive capabilities of their coverage.

At minimum, they said companies expanding into foreign markets need an understanding of local insurance regulations, including coverage requirements and compulsory purchases based on the nature of their business, as well as the supervising authorities that enforce those regulations.

Companies also should review the availability of nonadmitted coverage as well as underwriting expertise and capacity.

“There's certainly a need to be more and more cautious in addressing and overcoming your compliance issues in today's world,” said Claude Gallello, New York-based managing director at Willis Risk Solutions International.

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An issue of particular concern for U.S.-based multinational companies, panelists said, may well be local regulations that restrict corporations' ability to reimburse their directors and officers for lawsuits, fines or penalties levied against them.

“That's been the big issue with companies' international insurance programs lately,” said John Ellison, a New York-based partner at Reed Smith L.L.P.

Concerns about the availability of directors and officers coverage across international borders have been exacerbated by the recent surge in enforcement of the U.S. Foreign Corrupt Practices Act and similar laws overseas, Mr. Ellison said.

“The heightened enforcement activity going on around the globe has drawn people's attention to D&O cover,” Mr. Ellison said. “But there are so many forms of D&O coverage available in the market today that you can probably address it with what's already out there. You just have to be careful in terms of local compliance.”

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