National regulations are stopping multinational companies from buying global insurance policies to protect their interests, a new Ace Insurance report claims.

“The simple solution would be for a multinational enterprise to purchase a single insurance policy that effectively covered all of its risks wherever they arose around the world,” the report’s author, Ace General Counsel Suresh Krishnan, said.

“But the restrictions, controls and consequent uncertainties that flow from the operation of multiple national regulatory and taxation regimes means that this simplistic solution is not feasible.”

Many regulatory authorities have a blanket ban on entities buying insurance from anybody that is not locally based or licensed.

In some countries an entity is allowed to buy insurance from a non-resident insurer but tax penalties and other restrictions can be applied.

Countries with the most restrictive conditions on buying non-resident insurance include India, China, Japan, Korea and Russia. Those with a more relaxed approach include Canada, the US, the UK and Peru.

“A closer analysis of the structure and implementation of multinational programs is necessary to ensure regulatory and tax risks are not inadvertently assumed by the insured, insurance brokers and insurers,” the report said.

“This is so that the various participants understand their respective obligations to comply with local insurance and tax laws in the various jurisdictions applicable to the program.”

Ms Krishnan says designing multinational insurance programs first from a bottom-up local perspective and then from a top-down global perspective should help to deal with compliance issues while still making it affordable.

“The decision to directly insure the risks of a parent company’s subsidiaries through a ‘difference in conditions’ or ‘difference in limits’ policy issued to the parent company must be carefully considered,” she said.

“This is so that the insurer is not deemed by an insurance regulator to be improperly conducting the business of insurance in a jurisdiction where such risks are located.”