This article was produced in partnership with CNA Canada.
Bethan Moorcraft, of Insurance Business, connected with Adam Puchalski, underwriting specialist - international solutions Canada, and John Sterns, vice president, casualty and international solutions at CNA Canada, to discuss cross-border insurance solutions for Canadian companies.
The global risk landscape is awash with complexity. Businesses worldwide are contending with a wide swathe of challenges, from the COVID-19 pandemic to the war in Ukraine, economic inflation, supply chain disruption, natural catastrophes, cyberattacks and more. These are all risks keeping business leaders up at night – especially those looking to expand their operations internationally.
“When Canadian companies expand internationally, there are many factors they must consider,” said Adam Puchalski, underwriting specialist in CNA’s International Solutions team in Canada. “Do they set up a locally registered entity? Do they require labour in a foreign country? Will they have brick-and-mortar operations? What are the tax implications of operating in a foreign country? And perhaps most importantly, will they be compliant without foreign admitted insurance coverage?”
Admitted and non-admitted insurance coverage refers to whether or not an insurance policy is issued by an insurer authorized to do business in the country where the risk is located. Admitted coverage means the insurer is authorized (licensed) to provide insurance in a particular country, while non-admitted means the opposite. In some local jurisdictions, non-admitted insurance is illegal and, if discovered, subjects the parties to fines and penalties.
“There are many overarching benefits to purchasing locally admitted coverage,” said Puchalski. “With admitted coverage, the insured will comply with the local laws and regulations, avoiding fines and penalties [and] potential tax liabilities for non-compliance. Premiums and losses are paid in a local currency, which eliminates any negative impact of currency conversion.”
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One of the core benefits of having locally admitted coverage is local claims handling. John Sterns (pictured below), vice president, casualty and international solutions at CNA Canada, commented: “It’s easier to have access to local claims adjusters who understand the requirements of the country; the local laws, [the contractual, licensing, and permit requirements] and they have relationships with local contractors. Local claims adjusters can help get a business back up and running faster than if they try to do everything themselves.”
CNA’s International Solutions team focuses on providing international property and casualty insurance coverage for Canadian-based commercial customers as they expand into non-Canadian markets. The insurer has a strategic network of 226 business partners in 165 countries to write and manage local admitted insurance placements around the world in real-time.
Through CNA’s Oneworld+® Controlled Master Program (CMP), insureds can secure local policies in countries that require local admitted coverage and a master policy issued in Canada, which provides the necessary difference in conditions (DIC) and difference in limits (DIL) component over the local admitted policies. All coverages are consolidated on to one CMP underwritten by CNA.
CNA’s Cross-Border Insurance Solutions are “comprehensive by design,” according to Puchalski. They include the customary property, business interruption, liability and extra expense coverages, as well as automobile excess liability for owned, hired, and non-owned vehicles, foreign voluntary workers' compensation and employers' liability, kidnap and ransom insurance, business travel accidental death and dismemberment coverage and access to CNA’s Companion Services, which include medical emergency, travel and security assistance.
While there are comprehensive international insurance solutions available to Canadian companies, insureds need to conduct a thorough risk assessment to figure out their exposure to risks that fall outside of traditional P&C policies. One area to consider in today’s landscape is reputational risk, which can affect a firm’s capital, brand perception, market share and more.
The war in Ukraine has triggered a very complex geopolitical risk landscape, which cross-border companies must consider. “If a client is considering expansion overseas - depending on the geopolitical issues of the time - they should investigate political risk insurance,” said Sterns. “It can be difficult to obtain, or be expensive if available. It depends on individual risk tolerance.”
With the stakes so high, demand for international insurance solutions is increasing, according to Puchalski. He told Insurance Business: “What we’re seeing now, two-years after COVID-19 appeared, is heightened demand for companies to review international operations in a different light. We’re optimistic about the growth in the market as countries remove COVID-19 restrictions and expect to see an increase in both travel and international business opportunities.”
