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Providing cover for businesses overseas
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By Tim Weymouth, Associate Director, ACII, AIoL
During a visit to see my wife’s family in Malta over Easter, we happened to walk past one of our partner broker offices. In truth – and I’m sure my kids would agree – it didn’t quite make the holiday highlight in the same way as the trip round the Gran Harbour in Valetta. But I knew there and then this sighting would form the basis of a relevant article on how we could build on relationships with partner brokers in non-UK territories.
Essentially when looking to arrange insurance cover for an overseas entity of a UK client, we have two routes available to us.
- We can look to cover on an “admitted basis” where there is local policy placed within the local insurance market with a local broker administering the same. This is the most comprehensive route although often costly. However, this can also allow consistency of cover globally if placed on a master policy basis for the UK policy with a “difference in limit/conditions” clause which then ensures that the local (non-UK e.g., Malta) policies are aligned with the cover provided in the UK.
- The other option is to proceed on a “non-admitted” basis. Non-admitted simply means the insurer is not licenced / registered in (and is therefore not regulated by) the local territory where the cover or service is being provided. Many clients choose this as it’s often more cost-effective. In simple terms, this is where the UK insurer looks to agree cover for the non-UK entity under the UK policy. This does give rise to some issues, highlighted in the table below.
| Cover Basis | Admitted | Non-admitted |
| Benefits |
|
|
| Potential weakness | Cost: Commercial combined policies may have to be placed mono line which can mean minimum premiums of EURO/USD1,000 per line of cover Increased administration: Local policy documents will need to be issued and premiums may have to be paid locally, or even pre cover | Claim payments made to UK entity which could cause issues when looking to be transferred to local entity. Potential noncompliance with local legislation/taxes. No specialist advice from partner broker within the territory Not all countries allow non-admitted companies to provide insurance, so depending on the territory it may be that an admitted option is the only route permissible. |
Main takeaways are:
- Engage your broker in good time when you are thinking about an overseas entity. Aston Lark usually would not charge to investigate the options for you.
- Understand the differences between your admitted and non-admitted options. This allows you to review what is best for your business.
- Revisit the admitted v non-admitted question at each renewal. You can then ensure the option chosen remains the right one for you.
The key when looking to insure a non-UK entity is engaging with a broker that can give you options. At Aston Lark we have various options available to us, so you can select which is best for your business.
Many brokers don’t have these options or offer a “one size doesn’t fit all” solution. In my experience, I have placed insurance for clients using both bases – and that doesn’t mean one is right and the other wrong, as it’s an informed choice.
If your current broker hasn’t given you all the options, or you’re not sure which basis your recently created EAA subsidiary is insured on, please don’t hesitate to contact me. I’ll be happy to review your placement and advise how it could be refined to reflect your needs.
Coming soon: In a further article, I’ll cover the ability for brokers within the European Economic Area to passport into different territories. Which is a topic in itself!