Marine Cargo Insurance - Need For Local Policies

20 November 2015

We are seeing a growing requirement for compliant marine cargo programmes. In a world where local taxes and insurance regulations are evolving rapidly, marine cargo insureds may find that they have to be able to evidence cover by a locally-licensed carrier in more and more territories.

Corinne Boeri, a Partner in our Global Service Risk Practice, explains: “Historically, marine cargo has largely benefited from exemptions from local compliance. However, the combined effect of increasing centralised insurance buying; the development of compliant solutions by global insurers; and the stricter application of local regulations has created a more complex compliance environment.”

She adds: “This change in the compliance landscape is not limited to cargo and has come about partly because we are living in a far more globally regulated world. Compliance is an issue for any multinational seeking to protect their assets and financial interests consistently across the globe, without local tax or regulatory issues.”

Achieving compliance

There are two main approaches to achieving compliance where non-admitted cover is not permitted: decentralised – relying on local management to arrange local cover – or centralised, through an international programme.

Insureds are increasingly centralising their insurance because of a desire for control, consistency of cover and economies of scale, as well as corporate governance. Ultimately, they want to ensure that claims can be safely paid without breaching any local regulations or causing adverse financial consequences, such as tax fines, penalties or confiscations.

Insurers may not be able to pay claims locally that are covered on a non-admitted basis as they come under increasing scrutiny from local authorities and are at risk of penalties and other issues, including the possibility that their authorisation to operate in a country will be withdrawn.

Finally, marine cargo programmes are complex. Some of the questions raised when arranging cover are not straightforward, such as the location of the risk. Programmes often encompass additional cover, such as delay in start-up and inland transit. Consequently, multiple local regulations may apply and this has to be analysed in detail before arranging cover.

A range of benefits

While this increased focus on compliance brings its complexities, it also brings benefits. “The obvious benefit is having peace of mind that local regulations are met, taxes are paid, and cover can be evidenced locally,” says Corinne. “Crucially it also means that claims can be paid locally without the risk of part or all of the payment being seized by the local authorities.”

Global programme wordings tend to follow trends in the countries where they are designed, without reflecting local legislation intricacies. Therefore, another advantage of having local policies is that they usually follow local regulations and may include extensions available only in those territories.

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For more information, please contact Corinne Boeri, Partner in Global Service Risk Practice on +44 20 7558 3410