Global insurance programs are designed to, hopefully, simplify complex cross-border arrangements, and certainly where regulators can co-operate and regulations are aligned, it makes the process much simpler.

Undoubtedly, the EU’s Freedom of Services (FoS) means that a global program covering the EU can be simplified enormously through its use, with one admitted policy, thus reducing costs and administration. But while within the EU there is the ability to utilise FoS to create pan-European coverage, there are often incidences where this may not be the most appropriate approach and where a local policy may be required or preferred.  For example, where certification or evidence of cover is required in local language; for liability coverages where local law is very different to the law in which the master policy is issued such as Germany and France; and where local directors insist on a local D&O policy.

Even though FoS is clearly a good option in some scenarios, there are also numerous situations where a local policy is likely to be the more appropriate approach.  Consider the following:

• Without a local policy, the local insured would probably not receive a policy wording in their local language and nor would the wording be tailored to the local market, meaning that distinctive and sometimes important local coverages could be omitted.
• The absence of a local policy issued by a locally registered insurer will often mean that the insured cannot benefit from the protection provided by local insurance pools for exposures such as natural catastrophe and terrorism.
• The more remote, arm’s-length nature of FoS cover generally means that there is no local insurer representation in the event of a claim, which can clearly cause issues from a loss-adjusting perspective.
• In countries where there are more complex local tax, levy and fee structures, a local policy would make it easier to comply with the local tax legislation and, in some cases, also accounting practices. Law and jurisdiction also need to be agreed between policyholder and insurer, as well as the language and currency for all FoS locations, which may lead to challenges depending on the country involved.
• Servicing the client locally based on a local policy comes with benefits in the areas of market knowledge and local coverage specifics, as well as claims handling being locally available.

So, while FoS cover might seem like a simpler and cheaper option for the customer, insurer and broker at the outset, it can be a false economy depending on the nature of the risk and what happens from a claims point of view.