How global networks relieve international liability risk in natural resource sectors
A successfully globalized company must maintain both an international perspective and a keen understanding of local markets in their operational strategy. Evolving global events are interconnected and have far reaching ramifications in all aspects of business – including in the insurance marketplace. Sanctions and embargoes, for example, change and evolve, differing from country to country, and political instability and aggression are unfortunately prolific in many parts of the world. An international program (IP) is a centrally coordinated program consisting of local policies for every foreign entity supplemented by the Master cover from the Parent company, which provides a cross-border solution to the variance in regulations, liability risks, political climate, and local norms.
Natural resources risks, in particular Mining risks, very often have an international exposure. For example, a mining company may be headquartered in Toronto, but as rich geology is not impacted by borders, most of the locations and operations are domiciled in other countries around the globe. When a mining company expands globally, they are often confronted with a muddle of legal, tax, and supervisory regulations. A multinational diversified mining operation will also be inter-reliant on each facet of its operations as further processing of the product is conducted in other countries. A single physical loss in one country can quickly cause a business interruption risk in countries down the supply chain. Suddenly, a loss in one country is triggering an international domino effect on separate policies around the world.
There is no worldwide Insurance regulatory regime in place, rather it is a hodgepodge of national and regional laws and requirements. Compliance with local laws and regulations has been one of the primary drivers for the purchase of locally admitted policies. Navigating this uncertainty is best done with a strong team consisting of the Risk Manager, Broker, legal and tax expert, Claims professionals, and Underwriting company with its Network partners.
From the perspective of a Natural Resource company, it would be very important to ensure risks such as physical Property and Business interruption, Workers’ compensation and Employers Liability, Premises Liability, Environmental Liability and Auto coverage are considered and managed effectively. A cornerstone of an industry-leading IP is maintaining a real-time flow of information between network partners to monitor the performance of each of these components and any pertinent situational changes. This network alleviates the insured of weathering the complexities of a multi-line, international loss, should it occur.
Furthermore, an IP’s team of experts can anticipate and prevent serious mishaps that arise from cross-border disparities. Some countries have restrictions or strict bans on providing insurance cover from abroad. These are often termed “NANA” countries or “Non-Admitted Not Allowed”. These countries regulate that only insurance companies licensed locally may offer their services. Therefore, foreign insurers can only offer their services under particular conditions or through local insurers. When an insurance policy cannot pay on behalf of or legally represent a policy holder, companies may be seen as poor corporate citizens in the jurisdiction of the loss, not having purchased locally recognized insurance. A breach of local regulatory law may result in policies being voided as well as fines and penalties up to and including imprisonment.
There are many ways to approach an International Program once having appropriately assessed the risks under the parent company’s Master policy. Many solutions consist of coordination and placement of local policies while examining the entire risk holistically. Local policies provide market standard coverage and are often required for local certificates, travel visas, and local contractual requirements. Local claims handling and faster reaction times also offer significant benefits. A DIC/DIL (Difference in Conditions/Limits) offered under the Master policy helps to fill the gap between the local coverage and the Master policy when it comes to limits and differing aspects of coverage or the differing terms of the local policies.
Often organizations don’t really know how their insurance program would handle the complexity of an international loss until it happens, so running through various scenarios and understanding the risks can help build confidence that the right program and the right insurer are in place.
