AIG Multinational Solutions

One of the consequences of the financial downturn in Ireland was the increased number of Irish based companies who were forced to pursue opportunities in markets outside of Ireland and are now multinational companies.

When addressing multinational insurance programmes, global companies must consider the options available to them and the obstacles they face, through a detailed assessment of cross-border risks in the context of expansion of regulatory regimes and emerging markets.

What is meant by the term multinational?

A multinational is a company of any size that has assets and/or exposure outside its home country. A multinational’s exposures may initially be identified by asking the following questions; does it have directors, officers or employees overseas, own or rent foreign locations or warehouses, export abroad, have computer systems/infrastructure overseas?
There are 140,000 global multinational companies in the world. Of these companies 81% operate in only two countries, 17% operate in three to ten countries and only 2% have geographical distribution of over ten countries.

The Indemnity Trap

In the past, it was widely believed that having one policy in force for a parent company would be sufficient to cover subsidiaries worldwide. However this is not always the case, for example, if a non-indemnified claim is made against a director in a country where non-admitted insurance is not allowed. There are potential issues around who can pay the claim, and what are the regulatory/tax implications for the company or the director.
It is important that the multinational be aware of the potential pitfalls lack of local coverage can create in the areas of compliance, claims, income tax, proof of insurance and coverage.
In order for a multinational to understand its exposure it needs to consider its:

- Structure,
- Presence in the local territory,
- Whether it is locally listed on a stock exchange,
- Where its directors are resident.

It is worth noting that certain jurisdictions may require specific terms and conditions to be included in insurance policies in order to comply with local regulatory requirements. Also, the local operation may require specific covers to be included to ensure it is adequately protected.

Compliance/Local Authority Requirements

Regulatory Authorities may stipulate coverage is purchased only from a locally licensed carrier or may prohibit a local operation from having its parent company’s policy pay claims. Potentially local laws, customs and regulations may not be effectively addressed or even considered when drafting a parent company’s policy.

Proof of Insurance Requirements

It has become commonplace for counterparties or government entities to require evidence that coverage has been obtained locally as part of contractual negotiations. Reliance on a parent company policy may lead to breach of contractual covenants and may trigger commercial, contractual or reputational consequences.


Potentially a non-compliant insurance programme can lead to potential difficulties with local tax authorities. The multinational parent may incur a tax liability in its home country if the global policy cannot respond by paying the claim locally and must instead pay the parent company. Also, local subsidiaries may incur a tax liability if the parent needs to make a capital contribution to the local subsidiary.

Related Articles