16 October 2017

Commercial Risk Europe: IFRIMA will put global programme proposal to IAIS

The International Federation of Risk and Insurance Management Associations plans to put its proposals for changes to rules governing global insurance programmes to insurance regulators next year, according to Carl Leeman, board member and former president of the federation.

IFRIMA, which represents the main regional and some national risk management associations, will discuss the proposals to harmonise and simplify rules affecting global insurance programmes at a board meeting during this week’s Ferma Forum in Monaco.

“This is not an easy task and is a long-term project. But if anyone can get this done it is Ifrima,” believes Mr Leeman.

“If we do not try, no one else will sort this out for us. Insurance buyers, such as multinational companies with cross-border activities, continue to experience the same problems with global programmes as 40 years ago,” he said.

IFRIMA will propose an agreement with insurance regulators to allow cover in their respective jurisdictions through a master insurance policy with difference in conditions (DIC) and difference in limits (DIL) clauses, combined with local policies issued by a local insurer with appropriate limits. An appropriate proportion of the master policy premium should be allocated to the local entity and any applicable premium-related taxes paid locally.

“Our proposal would be a win-win for all relevant stakeholders as once accepted it will ensure that local authorities collect applicable premium-related taxes, while allowing the local entity to receive indemnification directly from the foreign insurer to invest in reparation work, maintain or create jobs locally, or pay damages to affected third parties,” said Mr Leeman.

Getting changes made to the way countries tax and regulate global insurance policies is “easier said than done”, admitted Mr Leeman. Some countries prohibit the use of non-admitted insurance for some lines of business, including cover written on a DIC/DIL basis.

“This comes down to the local regulatory and tax authorities around the world, and in some countries this is just not an issue that interests them. It is just a small part of their activities when compared to their life and non-life markets,” he said.

Given the challenges of dealing with multiple tax and regulatory authorities, the best chance of success lies in the International Association of Insurance Supervisors (IAIS), according to Mr Leeman. The IAIS, an international body representing national insurance regulators, drafts regulatory standards and guidelines for the industry, although these are not binding.

“We have to be realistic. It’s not easy to convince lots of local tax authorities and regulators, but our hope is with the IAIS,” said Mr Leeman. “This will take time and a lot of discussion, but contacting the IAIS is the best path forward. Our end target is simple, but how we get there will be complicated,” he said.

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