LONDON--(BUSINESS WIRE)--ACE Group today set out in a new report several questions that insurance buyers and risk managers at international professional services companies may wish to consider when designing multinational professional indemnity (PI) insurance solutions.
Authored by ACE’s Suresh Krishnan, Executive Vice President, Global Accounts Division, ACE Overseas General, and Grant Cairns, Regional Financial Lines Manager for Continental Europe, Eurasia and Africa in collaboration with the international law firm Kennedys, the report highlights that the number of jurisdictions where PI insurance is compulsory has been increasing. At the same time, the range of professions required to have PI insurance is expanding, with several professions including accountants, architects, engineers, doctors, healthcare professionals, solicitors, barristers and insurance intermediaries now obliged to purchase PI cover.
These new legal requirements are exposing increasing numbers of international firms to the risk of professional negligence, misrepresentation, or breach of duty claims when operating both at home and abroad. The report sets out some key questions for risk managers and insurance buyers when considering a multinational PI insurance programme, including:
1. Which jurisdictions apply?
Understanding the jurisdictions which apply, not only to their ‘home’ market but to other markets where a firm offer services, is important because it helps determine the applicable legal framework for PI liability; the frequency of claims that could be expected; whether PI insurance is compulsory; and the implications of providing advice in a country where the organisation does not have permanent operations.
2. What scope of professional services does the organisation provide?
With many professional firms presenting themselves as multi-service organisations offering a range of advisory services, risk and insurance managers need to be fully aware of the different service models in use and exactly which services are being offered in which territories in order to ensure that their PI insurance adequately covers them against all potential claims scenarios.
3. Who needs to be insured?
Clarity on this question is crucial, however many organisations fail to determine at the outset precisely which of their operating entities and their people are exposed to the risk of a PI claim in the different jurisdictions in which they operate.
4. What are the key elements of a PI insurance programme for our organisation?
In order to determine how their PI exposures can best be insured, firms first need to consider a number of basic key elements by which PI insurance is delineated so they can determine their specific needs including: the period of insurance; defence costs; retroactive date; types of liability covered; claims handling requirements; and territorial and jurisdictional limitations.
5. How should a multinational PI insurance programme best be structured?
Practical and technical considerations that need to be explored when structuring multinational PI insurance programmes include: whether parent/headquarter level only coverage is required; whether subsidiary/local affiliated offices level cover is needed, or if a combination of the two would provide better protection. Consideration of the legal status of “non-admitted” polices locally is also key.
6. Has the role of excess insurance adequately been considered?
The role of excess insurance, either of the primary policy or excess cover as an umbrella tower purchased outside the jurisdictions where an organisation’s risks are situated, also need to be considered as excess insurance policies are governed by the same regulations and tax rules as those applying to the primary policies.
Grant Cairns, Regional Financial Lines Manager for Europe, Eurasia and Africa at ACE said:
“Across many parts of the world, the requirements for key professions to carry PI insurance have been increasing. As a result, astute risk and insurance managers at global professional services firms are rightly seeking to apply their experience gained in structuring multinational insurance solutions for traditional classes of business to PI insurance.”
Suresh Krishnan, Executive Vice President, Global Accounts Division for ACE Overseas General, added:
“When purchasing specialty lines of insurance – and especially multinational PI insurance –choosing an insurance partner with a proven track record of multinational expertise and servicing capabilities is crucial to managing expectations of programme performance across international borders and understanding how the programme will respond whenever and wherever needed.”
For the full checklist of questions for risk and insurance managers to ask when designing a multinational PI insurance programme, view the report ‘Structuring Multinational Insurance Programmes – Issues for risk and insurance managers to consider when insuring professional indemnity risks across borders.’
ACE Group is one of the world’s largest multiline property and casualty insurers. With operations in 54 countries, ACE provides commercial and personal property and casualty insurance, personal accident and supplemental health insurance, reinsurance and life insurance to a diverse group of clients. ACE Limited, the parent company of the ACE Group, is listed on the New York Stock Exchange (NYSE: ACE) and is a component of the S&P 500 index.