A non-authorised insurer is the term used to describe an insurance company that isn’t licensed with a particular country to provide insurance. This can also be known as non-admitted insurance. The non-authorised insurer doesn’t have to comply with local laws and regulations, however, one consequence of not being authorised means it doesn’t get the same protection as an authorised insurer.
A non-authorised status doesn’t always mean the insurer can’t provide insurance services in that territory. The insurer can still offer insurance products, although through a registered broker or intermediary in the territory, or where allowed, the insurer can insure products directly with local policyholders in so far as the policyholder makes the first approach to the insurer.
It’s important to know that some countries don’t allow non-admitted business at all. This could be to preserve the local insurance market or to protect the policyholders in their country. This can be a challenge for a foreign insurer and prove to be almost impossible for them to do business in that country without local help. In some jurisdictions though, some exceptions may be granted and specific risks such as international cargo, marine and aviation insurance can be written on a non-admitted basis.
Knowing where the obligation lies
Where insurance premium taxes (IPT) are concerned, there may be a few different methods when declaring the taxes and insurers should recognise where the obligation and responsibility sits. Some countries may require the foreign insurer to register for tax purposes in order to settle their tax liabilities. Others will require the policyholder or local broker to settle on the insurer’s behalf, removing this compliance obligation from the insurer. Knowing who the obligation lies with and recognising and applying the individual compliance needs for each country is an enormous step in being tax compliant. Once these parts are known, the action of declaring and settling the tax liability should be relatively straightforward to complete.
Some insurers that write large, complex global policies and where it may not be possible to meet the compliance needs of all territories where they have an insured risk could use a financial interest clause to cover all their risks. This financial interest clause (FInC) removes the need for tax compliance at a local level, as the global policy insures the balance sheet risk at the company’s headquarters. Should an event trigger a claim against the policy, the compensation will probably be paid out to the headquarters and not the local entity where the event occurred. This has administration benefits and compliance benefits as the policy should only trigger IPT where the headquarters is situated.
Writing insurance business on a non-authorised basis can bring its own challenges regarding tax compliance. Understanding who bears the cost of the tax and who completes the returns and payments is crucial to ensure an insurer stays fully compliant. Using a financial interest clause can ease some compliance burden and can give an insurer coverage in countries where even non-admitted insurance is not allowed.
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