Uncovered Abroad

As businesses expand their operations overseas, the demands for insurance coverage also grow. But making sure that your assets are covered is just the beginning of the process, experts say. Increasingly, local governments are shifting the onus to the insured to vet the carrier. If local regulators determine the insurance company is not properly licensed, their clients face big fines, policy cancellation - even jail time.

"One of the major, trending issues facing a company could be the potential to have fines imposed for transacting insurance with an insurance carrier not licensed in the jurisdiction where the customer is doing business," said Scott Taber, Vice President, Senior Assistant General Counsel, Zurich in North America.

In Mexico, for example, the insured faces up to 10 years in prison for buying non-admitted coverage. Other jurisdictions may be less harsh, but it is increasingly common for companies to face fines, taxes, license revocation and penalties for directors and officers. 

In one noted case of unauthorized life insurance from a U.S. company, regulators in Argentina fined the insurance customer eight times the premium and fined the broker 15 times the premium, and canceled the policy. In Switzerland, a broker was barred from practice and the coverage was cancelled for selling nonadmitted insurance.

"Not only do you need to investigate whether a potential insurer is licensed to practice in your jurisdiction, but whether they can adequately respond in the case of an event," Taber said. "It's a fair question to ask any insurer not only whether they are licensed to write insurance in that jurisdiction - and whether they need to be - but also whether they are equipped to handle claims and conduct risk engineering locally," Taber said.