New tool for global regulatory compliance

As more global organisations strive to tackle corporate responsibilities across multiple territories, Aon has launched a pre-placement tool (PPT) and premium allocation tool (PAT) to ensure compliance with local insurance and tax regulation.

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, said the broker.

Aon encouraged companies and insurers to monitor the compliance duties that come with global programmes.

The PPT is a 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.

Aon pointed in particular to three problem areas:

• 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– 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.

Aon warned that 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.

Ken MacDonald, chief executive officer 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.’