0. Axco THE IMPORTANCE OF COMPLIANCE ABROAD JANUARY 29TH, 2014
ERV, STOCKHOLM

1. © Axco Insurance Information Services 2014
ABOUT AXCO
About Axco
With over 40 year’s experience in researching and delivering industry intelligence, Axco provides business-critical compliance and market data on non-life, life & benefits and employee benefits markets across the globe.
Axco information is relied upon by a diverse range of organisations and our client base includes the world’s foremost insurers, reinsurers, brokers, and employee benefits professionals.
Our unique business model and methods of research have enabled us to develop an extensive suite of products comprising in-depth reports, profiles, Q&A databases and information platforms.
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2. THE AXCO BUSINESS MODEL02
THE AXCO BUSINESS MODEL
The Axco business model
Axco operates under a mutualised outsourcing model
We look to build long term partnerships with both our clients and information and data sources
We undertake to understand our client’s individual requirements
We prioritise frequent interaction with our clients
We are committed to developing new and innovative methods of information delivery.
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3. HOW IS AXCO INFORMATION RESEARCHED Other Brokers & Insurers03
HOW IS AXCO INFORMATION RESEARCHED
Local Offices
Interviews,
Correspondence
Copy of
Axco report
Partners
Other Brokers & Insurers
Specialist Compliance Research Team
Axco Database
Central Global Industry Repository
Interviews,
Correspondence
Regulators
Copy of Axco report
Correspondence
Interviews,
Copy of Axco report
In-house research
Associations
Global Users Feedback
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4. INTERNATIONAL INSURANCE REQUIREMENTS
The challenges of international insurance
International companies, international operations = International risks
196 countries in the world = Hundreds of jurisdictions, cultures, insurance practices
Spectrum of insurance market development: Emerging/low expertise to Developed/well-funded
Aims of regulations: laws designed to protect consumers of insurance and financial systems not international companies
Accepting grey answers: Complexity (of the world), Ambiguity/Uncertainty (of insurance regulations)
How many countries are there?
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5. COMPLIANCE ABROAD CHECKLIST05
COMPLIANCE ABROAD CHECKLIST
‘Compliance Abroad’ checklist
Market environment
Insurance regulations and supervisory authority
Is non admitted permitted?
Local coverage requirements
Compulsory insurances
Taxes and charges
Local underwriting expertise and capacity
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6. © Axco Insurance Information Services 2014
Market Environment
Market environment
Ghana:
25.31 Million
51.9% Urban
Resources
Exports
Brazil:
Natural Resources
Million
84% Urban
Events
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Market Environment
Market environment
GDP goes up to 2012.
Ghana projected GDP growth %: %
Brazil projected GDP growth %: % %
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8. Market Environment Insurance Law 1989
Specific insurance regulations and supervisory authority
Ghana
Proposed legislation can take years to reach Parliament
Brazil
Four resolutions to just set out the basis of premium and loss reserves
Rapidly developing insurance and reinsurance market
Supervisors and Regulators want to protect local companies
Insurance Law 1989
Supplemented by Insurance Regulations 1990
Insurance Act 2006
CNSP Resolution no. 162 – 26 December 2006
CNSP Resolution no. 181 – 17 December 2007
CNSP Resolution no. 195 – 16 December 2008
CNSP Resolution no. 204 – 28 May 2009
Ghana:
National Insurance Commission has been designing a risk-based solvency model for the Ghanaian insurance industry in line with international insurance sector best practices. New Insurance Act implementation was expected in late 2013.
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9. © Axco Insurance Information Services 2014
Insurance Options
On what basis can I write Insurance?
Four main ways to write international business
Admitted – Policy is issued locally from a locally registered and based company
Cross Border Agreements – e.g. Freedom of Services
Fronting – Local office used and reinsured out
Non Admitted – Unauthorised Insurer
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10. © Axco Insurance Information Services 2014
What is Non Admitted?
What is meant by non admitted?
Definition. Non-admitted insurance refers to the placing of insurance outside the regulatory system of the country in which the risk is located. A non-admitted insurance policy is one that may be issued abroad or the risk(s) may be included in a global master policy by an insurer unauthorised in that country. An authorised insurer is one which is permitted to do business in a country (or region) by the local supervisory authority.
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11. International Insurance Programme
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12. International Insurance Programme
Admitted
Locally Licensed and Regulated
Sweden Supervision Section?
Abiding by the Local Insurance regulations
Very few surprises
Good relationship / regular dialogue expected between local supervisor and local insurance companies
Note: certain compulsory insurances have to be placed with insurers who have received authorisation from the supervisor
Sweden has a sophisticated local market with many major international insurers having a presence > meaning little reason to seek insurance protection elsewhere.
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13. International Insurance Programme
FOS
International Agreements
As if Locally Licensed
Taxes and Charges
Points about FOS:
Legislative drive to create a single market in insurance services
An insurer with a head office in an EEA member state is automatically entitled to provide services in another EEA member state (provided that the insurer has informed the supervisor in its home state)
Facilitates writing of business the EEA (EU plus Norway, Iceland and Leichtenstein)
French Dependencies where FOS applies:
French Guiana
Mayotte
Guadeloupe
(these locations are regions/departments of France and apply French law in its entirety)
What are the downsides of FOS
Ireland: supervisory levy > applies to FOS insurers writing business in Ireland (even if not through a local branch or HQ in Ireland) (Axco has a copy of the relevant law on file)
Kvaerner: defined the location of liability for premium tax > this is to be paid to the authorities in the member state in which the risk is situated.
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14. International Insurance Programme Locally Licensed Office
High Level of compliance confidence
Local Broker
Policy Wording
Policy Issue
Premium Payment and Terms
Local Capacity
EGYPT
Setting up an office abroad.
PROS - local expertise, local policy wording (and con DIC/DIL?), physical local document, same payments and claims as Swedish parent company. Payment of claims assured
CONS - Supervision section, cost implications (leasing, getting licensed), overheads.
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15. International Insurance Programme Non Admitted is Permitted
Australia
Permitted if at the insured’s initiative
NB exceptions: WC, compulsory third party and builders warranty (restricted to domestic insurers which have specific approval from state governments)
Premium Taxes
Australia has an extraordinarily complex system of premium taxes
Amongst the highest in the world
With the general exception of goods and services tax (GST), non-admitted policies are subject to the same array of taxes and charges as admitted policies. Taxes payable on non-admitted policies comprise deemed profits tax equivalent to 3% of the gross premium, fire service levies applicable in New South Wales and Tasmania, as well as stamp duties applicable to different policies at different rates in all states and territories.
Claims management: difficulties in administering from abroad (time zones).
What else to consider? Complex taxes – is the best way of ensuring compliance with the tax regime to take out a local policy or user a fronting partner?
Insured’s Initiative
Exempt lines of business
Compulsory Insurances
Taxes and Charges
Claims management
Non Admitted is Permitted
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16. International Insurance Programme Non Admitted NOT permitted
Abide by all local regulations
Long term partnership
Local knowledge
Not ideal for one time placements
Exposed to Reinsurance taxes
Expensive
Brazil
-non-admitted is not permitted > law says that insurance must be purchased from locally authorised insurers.
Note exceptions: coverage not available / lack of interest in providing cover.
Where there are less than 10 companies operating in the relevant class of business, insureds/brokers must consult all companies that do write it ….
Let’s use fronting instead:
- Due diligence > cost > up to date financials readily available?
Use reinsurance examples, look into complexity of laws surrounding reinsurance
Life insurance written on Non Admitted fined 30 times premium – DB to provide example
- Complex reinsurance arrangements
Non Admitted NOT permitted
Fronting Partner
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17. International Insurance Programme
Central Cover
DIC/DIL, Financial Interest Clause, Master Policy
Non Admitted NOT permitted
Ghana
Fines and penalties – up to 2,500 penalty points (penalty points are a value amended from time to time) and/or up to 5 years’ imprisonment.
e.g. South Korea: maximum penalty 5 years’ imprisonment or a fine up to USD 26,270.
Who wants to go to jail for broking an insurance policy????
Look at Nike (referred to as a global brand in sportswear…) in India – good example of getting into trouble over claims payments – DB to provide
Non admitted taxes are payable, but would you pay them? Would you want to alert the authorities to business being written on a non-admitted basis?
Perils of the untested in the courts FINC, DIC/DIL (Not covered in local legislation – is effectively non admitted), DB and CAY see if any other notes…
Somebody will eventually be made an example of….
Claims payments
if the policy is written on a non-admitted basis when it is NOT permitted AND the insurer is not in that country then often there are problems in paying claims to the insured.
Getting money into the country as a claims payment is likely to arouse suspicion.
In non-admitted situations, claim payments are considered as income for the insured and are therefore taxed accordingly.
Penalties
Prison
Reputational Damage
Claims payments
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18. International Insurance Programme
Overview of this simple, highly multinational and not uncommon insurance policy.
Recap a couple of the major points
Supervisors
Taxes
Claims
Reputation
THE INSURED!!!
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19. International Insurance Programme
Admitted
FOS
Locally Licensed Office
Central Cover
DIC/DIL, Financial Interest Clause, Master Policy
Non Admitted NOT permitted
Fronting Partner
Non Admitted is Permitted
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20. © Axco Insurance Information Services 2014
How can Axco help?
HOW CAN AXCO HELP?
Critical to have knowledge in order to continue writing compliant programmes
Axco’s remit is to provide information
On the ground research: Axco visits countries
Avoiding information overload: ‘Less is More’ product development = right information for the right person at the right time
Integration of information sources and product design: portals, annotations, click-throughs
Combine that information with your expertise
KNOWLEDGE
Who to talk to
What questions should you be asking
What pitfalls should you be looking out for
Never a straight forward black and white area
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21. © Axco Insurance Information Services 2014
Axco Products
Insurance Market Reports
Comprehensive country by country insurance market information
Non-Life (Property & Casualty) and Life & Benefits.
Employee Benefits Reports
Comprehensive coverage of worldwide employee benefits markets.
Regulatory Alerts
Monthly alerts reporting on key developments in regulation, legislation and premium taxation.
Global Statistics
Current and historical statistics covering non-life and life & benefits markets in over 180 territories worldwide.
Clinical Trials
Clinical trials insurance information for over 170 territories, including market and compliance data.
Compliance Point
A single “go to place” combining regulatory and tax compliance information.
Insight
Using Q&A structure, Axco Insight provides a customisable overview of global insurance markets.
CIMS Market Profiles
Focused information on key aspects of the market and compliance requirements in over
170 territories.
Country Benefits Profiles
Concise information on state and compulsory benefits and typical employer practice in 69 countries.
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22. Non-Life INSURANCE MARKET REPORTS (IMR)22
Non-Life INSURANCE MARKET REPORTS (IMR)
Non-Life Insurance Market Reports
Non-life insurance market information for over 170 countries
Essential legislative, insurance regulatory and tax compliance information
Insurance market overview, distribution channels, market size, structure and key players
All major lines of non-life business
Comprehensive appendices containing market statistics, company statistics, and directory of key market contacts
Create customised reports to facilitate client presentations and business tendering
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23. © Axco Insurance Information Services 201423
Insight Compliance
Insight Compliance
Delivering global non-life (P&C) insurance regulations and taxes at a glance
Single point of reference for non-life insurance regulatory and tax compliance requirements
Question & Answer structure, with topics compiled from clients' most frequently asked compliance questions
Line of business-specific regulation for over 170 territories
Customise and filter data according to territory, line of business and regulatory topic
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24. © Axco Insurance Information Services 2014
Axco Compliance Point
Compliance Point
Interactive compliance tool guiding users through multinational insurance programmes calculating all taxes and charges that are applicable.
A single “go to place” combining regulatory and tax compliance information.
Market solution tailored to user group needs
Intelligent questioning prompts users for the exact information needed as they progress through the system.
Up to date, transparent and unbiased information from multiple sources.
Auditable trail of decisions and results
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25. For further information about Axco or for product demonstrations please come and find us afterwards.
Thank you

26. Carol Au-Young Ali Mufti
Teams of London-based in-house research analysts, editors and statisticians ensure that information is maintained and updated to the highest standards.
We welcome client enquiries and feedback which are integral to the continued development and enhancement of our products.
Carol Au-Young
Ali Mufti
Axco Insurance Information Services
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EC2N 1DW
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