Allianz Global Corporate & Specialty
International
Insurance Solutions
Angelo Colombo
November, 2014
Increasing demand for international services
Increasing globalisation is fundamentally changing the business landscape – and with
change comes new challenges for international risk management.

New exposures from vertical and horizontal integration and
accelerated supply chains

Global interdependencies between suppliers and customers, as
well as with business partners

Increased regulation creates additional need for transparency and
corporate governance

Mergers, acquisitions and joint ventures – often with diverse
cultures

Multinational legal and fiscal environments

Increased international trade in emerging markets – increasing
exposures and the potential for international litigation

Pressure to improve efficiency and effectiveness of risk
management, especially on a globally coordinated basis

New risks emerging from mergers, acquisitions and joint ventures
International Insurance Solutions
© Copyright Allianz Global Corporate & Speciality 8-Apr-15
Never before has there been
a greater need for integrated
risk management – globally
coordinated and managed,
but locally delivered…..
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Business is global and so are the risks
Insured
location 5
Insured
location 4
Indirect
Supplier
Insured location2
Insured location 1
(HQ)
Indirect and direct
Supplier
Insured
location 3
Direct
customer
Indirect
customer
Power Supplier
How should your risk management respond in case an event arises?
International Insurance Solutions
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Which solutions can risk managers chose from ?
Building blocks
Single
European
policy
(FOS)
Property example
Master Policy provides Difference in
Condition (DIC) and Difference in
Limits (DIL) cover, over and above
locally admitted policies.
DIC/DIL
FOS
US
Germany
Italy
Italy
Austria
Austria
Australia
Thailand
(optional)
Singapore
DIC/DIL
above
local
policies
Program structure
Policy scope
(limits and conditions)
Standalone
local
policies
International
Insurance Solutions
(IIS) is the broader
meaning of different
structures and services
that can be offered in
response to specific
global insurance needs
of different clients and
their set up.
1:
2:
3:
4:
5:
Parent company (e.g. in Singapore)
Thailand
Australia
FOS Countries
US
Geographical territories
Centrally
controlled
master
program
 Local policies issued dependent on risk and
maturity of market
 Master cover provides global umbrella
 Harmonized coverage across the program
for corporate protection
 Premium is allocated in relation to local risk
and exposure
 Local policies are re-insured by the master
policy insurer to the level legally permitted
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However, regulatory pitfalls have to be avoided
Over 200 local insurance laws &
taxes vary country by country
(sometimes, even state by state)…
Violations can result in :
 Unanticipated tax charges
 Fines and penalties
 Trade disruption
 Sanctions & Embargoes
 Reputation risk
 Prison
Countries to watch out
E.g., Brazil, China, India, Russia
International Insurance Solutions
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How to deliver a comprehensive, consistent & compliant, insurance
program that covers all the main risks at a cost-effective price?
Cost
Compliance
Control
Coverage
Overall risk managers need to balance the 4C’s when choosing the
optimal solution for their company
International Insurance Solutions
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It’s all about flexibility …

DIC/DIL
FOS
 Including mandatory local coverage
 Taking local supervisory aspects into consideration, e.g.
minimum local retention
US
Germany
Italy
Italy
Austria
Austria
Australia
Thailand
Local policies follow best market standards
 Adequately reflecting and covering client local risk
(optional)
Singapore
Property
Example
Policy scope
(limits and conditions)
We offer truly customized international insurance solutions for clients with international risk
exposures aligning local and global coverage
Geographical territories
 Risk based premium allocation
DIC/DIL
FOS not recommended
US 1
US 2
US 3
Germany
Italy
Austria
Australia
Thailand
Umbrella
Singapore
Liability
Example
Policy scope
(limits and conditions)
 Administration of local taxes

Pooling of local policies via reinsurance *)

Harmonizing overall coverage by including local
companies under the Master in DIC / DIL

Captive fronting based on client needs

Potential sharing of risks with a panel of coinsurers /
reinsurers
Geographical territories
*) to the degree legally permitted
International Insurance Solutions
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Regulations and Compliance
The Question of „Admitted“ versus “Non-Admitted“
•Local insurance law (more than 200 different laws) mandates that a policy is issued or
coverage provided with an insurer licensed in the country where the risk is located.
Admitted:
Non-Admitted:
An admitted policy is a policy issued or
coverage provided by an insurer
to a policyholder domiciled in a territory
where that insurer is licensed.
A Non Admitted policy is a policy issued or
coverage provided by an insurer
to a policyholder domiciled in a territory
where that insurer is not licensed.
Exceptions: Self procurement, prior approval by host state regulator, broker licensed etc.
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2. Expertise
Your questions on legal aspects of international insurance
program answered I/II
What does admitted and non-admitted insurance mean?
Many countries have regulations in place requiring that insurance be taken out with insurance companies that are licensed (admitted)
to write direct insurance business in the country. In those countries the provision of cross-border insurance on a direct basis (nonadmitted) is prohibited or subject to conditions.
How do IIP respond to this?
As part of an international insurance program, local policies are issued related to the risk and exposure as well as capacity and cover
available in the market, which are respecting local regulatory aspects. Our extensive global network allows us to issue admitted local
policies in countries where your risks are located.
Why does Difference in Conditions / Limits (DIC/DIL) matter?
Depending on the capacity and coverage of markets and the agreed structure of the international insurance program, it can be more
efficient to provide additional coverage and/or limits through the master policy complementing the local policies. DIC/DIL is subject to
cross border insurance provisions described above.
How can AGCS help you?
Where permitted the foreign subsidiaries of the parent company can be included as additional insureds in the master policy. The
DIC/DIL provision describes the additional coverage provided above local policies. The parent company is the policyholder of the master
policy and receives the loss payment.
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2. Expertise
Your questions on legal aspects of international insurance
program answered II/II
Why does Insurance Premium Taxes (IPT) matter?
In countries where IPT exists, the tax laws regulate the amount and calculation base for insurance premium taxes, levies and fees
(parafiscal charges to IPT) that are charged in relation to the insurance premium.
How can AGCS help you?
Our extensive global network allows us to issue admitted local policies that take care of the local IPT requirements and the handling of
the IPT and its parafiscal charges (to collect and transfer to the tax office). Within our international insurance program’s premium
allocation is related to local risk and exposure.
Why does transfer pricing matter?
Transfer pricing regulations should be considered if the parent company centrally purchases insurance coverage on behalf of its
subsidiaries but pays premiums centrally. The customer should ensure that the group internal allocation of premiums and claims
payments complies with the arm’s length standard to avoid double taxation.
How can AGCS help you?
The parent company must consult with its accounting, tax and finance specialists and analyse its needs and obligations. Once the client
has performed the analysis, we consider those aspects in structuring the international insurance program.
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2. Expertise
A client example
A Singapore based company with subsidiaries all over the world
purchases international insurance programs in various lines of business
Germany
Austria
Italy
US
Thailand
Singapore
Australia
HQ
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2. Expertise
Property claims example:
The case of natural catastrophe
Scenario description
3 months of flooding caused huge damages to a Thailand factory with a coverage of Total
Sum Insured:
Property Damage (PD)
EUR 300mn
Cat Limits agreed
Business Interruption (BI)
EUR 200mn
Master Flood Limit
EUR 40mn
Total
EUR 500mn
Local Flood limit
EUR 30mn
Example of Settlement
EUR 40mn
DIC/DIL
FOS
US
UK
Germany
Italy
Austria
Australia
Thailand
(optional)
Singapore
Loss due to business
Loss due to physical
damage on machinery, interruption (BI)
building, etc. (PD)
EUR 25mn
EUR 15mn
Policy scope
(limits and conditions)
(Illustrative & simplified)
Geographical territories
Local Compensation
EUR 30mn
DIC / DIL Compensation
EUR 10mn
Total Compensation
EUR 40mn
Total loss EUR 40mn
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2. Expertise
Liability claims example:
The case of production interruption
Scenario description
One of the Client’s component of a production line was defective due to a design error and
caused property damage to 25 customer in 5 different countries. The components have to be
exchanged. Property damage EUR 1 mn and costs for dismantling and reinstallation EUR 5 mn.
Affected are
 5 local policies with a limit of EUR 1mn each for the
property damage
 Master Policy for the exchange costs (DIC) with an overall
limit of EUR 50mn
Total loss EUR 6 mn
Example of Settlement
EUR 6mn loss
DIC/DIL
US 1
US 2
US 3
Germany
Italy
Austria
Australia
Thailand
Umbrella
Singapore
Policy scope
(limits and conditions)
(Illustrative & simplified)
Geographical territories
International Insurance Solutions
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