Monetary curiosity protection: A key part for corporations with worldwide exposures
“Financial interest coverage has been offered more regularly over the past five to ten years,” said Elliott Foster (pictured), Managing Counsel at Travelers, which automatically includes financial interest coverage through its Global Companion Plus + product for US companies. with foreign commitments. “The insurance was created in response to a loophole created by other countries: ” If you want to cover someone in our country, you must have locally approved or licensed insurance. ‘”
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Even though the product has been available for over a decade, carriers are still taking very different approaches to their offerings. There is no standardization of who is insured, what is insured, and how much coverage is available, which makes financial interest a bit of a tricky solution for both insured and brokers.
For this reason, Travelers relaunched its Global Companion Plus + product in January 2021 with brand new features including: a separate limit of $ 1 million for the coverage of financial interest, a global advisory service, a primary compensation for foreign volunteers and an evacuation cover in case of emergency. Travelers “have put a lot of thought into the latest iteration of the Controlled Masters program,” noted Foster, to “solve questions that often go unanswered by other markets.”
“We fixed five common pain points [relating to] Financial Interest Insurance, ”Foster told Insurance Business. “First, we created a separate limit so that our policyholders know exactly how much coverage they have. When referring to “who”, the question is often asked, “Does this only apply to overseas subsidiaries or would it include joint ventures and affiliates?” Travelers’ Global Companion Plus + makes this very clear, and it’s a fairly comprehensive solution. As far as “what” is covered, some policies are unclear: “Does it just mean a loss? Will it also cover defense costs or back payments? ‘ The Travelers product again makes this clear and covers all of these elements.
“There are two other things that are very important. One question foreign companies have is, “Who will defend us?” [legally]? ‘ In a standard listing this is sometimes unclear, but Travelers has developed a list of panel advisors so that we can refer our clients to verified law firms in the country that can defend their affiliate or their interests. The last point is taxes. When money is sent across borders, only from a parent company to a subsidiary, taxes or other assessments of cash injections sometimes apply, and Travelers put it like this: “For the unexpected taxes you may incur on a financial interest payment , these are included in the cover. ‘”
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Financial interest coverage is relevant to any business, regardless of size or industry, that has a foreign subsidiary, explained Darren Caspers (pictured below), Assistant Vice President, Global at Travelers. However, before making a coverage decision, it is important for policyholders and brokers to understand the coverage requirements in the jurisdiction in which they operate. Sometimes financial interest coverage can be purchased in lieu of a local policy, but in some countries a locally approved policy is required to be in place. Navigation can be a complex system.
“Every country is different, of course, but if there is a local subsidiary and it buys a local policy, this financial interest coverage is not intended to replace that local coverage; it’s supposed to make an improvement, ”said Caspers. “There are often different conditions or different limits (DIC / DIL) coverage on the controlled master that would come into play.”
Customers should always consult insurance brokers, their legal and tax advisors to help them decide which combination or combination of solutions will work best for them, Caspers emphasized.
He explained why: “International insurance programs can be complex and very difficult to implement. Hence, it is really a partnership between the broker, the client, and the insurance carrier to determine the client’s needs. It really depends on the client’s situation and the countries they are in, but we encourage policyholders to always seek advice from a global insurance broker when determining what coverage is required for their international program. “