Aon Global Offering Tools for Global Program Compliance

Changing regulation and local laws mean that companies could be relying on invalid insurance policies for certain countries or face penalties for not fulfilling the local regulatory and tax requirements.

As more global organisations strive to tackle corporate responsibilities across multiple territories, insurance broker Aon Global UK has launched its Pre-Placement Tool (PPT) and Premium Allocation Tool (PAT) to ensure maximum compliance with local insurance and tax regulation.

For firms that operate in multiple countries, global insurance programmes offer premium savings, plus the knowledge and certainty at HQ that there is consistency of protection globally. However, Aon is encouraging companies and insurers to monitor the compliance duties that come with global programmes.

The PPT is an advanced database tool used to check all regulatory elements of a global policy before cover is placed. A traffic light red warns if a policy is ‘non-admitted’ or must be placed by a local insurer, so clients can be advised accordingly. Hotspots in global policies include:

· China, Brazil or India, for example, prohibit overseas or ‘non-admitted’ insurance for directors and officers, general liability, property;

· many African countries require local risks to be covered by local licensed insurers;

· parts of Europe such as France, Italy and Spain require local risks to be covered by EU licensed insurers.

PAT allocates the global premiums on a just and reasonable basis – according to where the risk is located, rather than countries with more favourable tax rules – to determine the premium tax liability in each territory for either the insurer or the insured. The tools are updated regularly for changes in worldwide regulatory and tax rules, such as the tax rate changes in the Netherlands and the new Australian Direct Offshore Foreign Insurers regulation in 2008.

Tax compliance failure could lead to interest on unpaid balances and penalties for insurers, brokers and insureds. For example, in the UK, failure to notify the government makes the insurer liable to a penalty equal to 5% of the relevant tax. Generally in the EU, an insurer or its fiscal representative is responsible for collecting and discharging the premium tax. But in US, Canada, Australia and New Zealand, the local insured or its broker is responsible.

Ken MacDonald, CEO of Aon Global UK, commented: “It’s time for all organisations to demand greater compliance and insurer transparency. For the CEO, FD or risk/insurance manager, insurance is not just about achieving the best coverage at the highest security and lowest cost but it is also a capital replacement tool that must respond and comply with local fiscal and regulatory realities. The good news is that companies are now finally switching on to the implications, while insurers are waking up to the issue. With the increased profile of fiscal and regulatory compliance risk, Aon is now raising the bar to help our clients be compliant.”

“At our recent conference on compliance for global companies, there was a growing interest to ensure regulatory and tax compliance to support the efficacy of insurance programmes and corporate governance. As such, we have been investing our resources to develop our new tools and design insurance programmes that support clients. These work alongside consideration of clients’ needs, available capacity and coverage and the vagaries of the insurance market.”

Martin Massey, head of business development for Aon’s actuarial and analytical services, whose team developed the tools, commented: “These tools place a spotlight on the territories that require special planning in the design of the insurance programme. They provide a complementary service to our existing corporate allocation modelling tools that aim to provide consistent service and benefits to our clients in three main areas of IT functionality, methodology and compliance.”