What is meant by 'location of risk'?
Location of risk means the country, state or territory in which an insured risk is deemed to be situated for regulatory and tax purposes.
How do I determine the location of an insured risk?
The location of a risk is determined by referring to applicable insurance laws. The insurance laws of many jurisdictions contain a definition of what is a locally situated risk, meaning a risk whose insurance is governed by the jurisdiction’s insurance laws and is subject to the jurisdiction’s premium taxes or other fiscal charges.
Examples of legal definition of location of risk
European Union Directive 88/357/EEC (2nd Non-Life Insurance Directive)
Article 2(d)
‘Member State where the risk is situated' means:
- the Member State in which the property is situated, where the insurance relates either to buildings or to buildings and their contents, in so far as the contents are covered by the same insurance policy,
- the Member State of registration, where the insurance relates to vehicles of any type,
- the Member State where the policy-holder took out the policy in the case of policies of a duration of four months or less covering travel or holiday risks, whatever the class concerned,
- the Member State where the policy-holder has his habitual residence or, if the policy-holder is a legal person, the Member State where the latter's establishment, to which the contract relates, is situated, in all cases not explicitly covered by the foregoing indents.
[This definition has been inserted into the insurance laws of all EU member states]
Singapore Insurance Act, First Schedule
2. - (1) Subject to this paragraph and section 16 (3) and (4) of the Act, “Singapore policy” in relation to any insurer, means a policy issued in the course of the insurer’s business in Singapore and falling within one of the following descriptions:
(a) a life policy or accident and health policy in the case of which, at the date of issue of the policy and (if the policy was issued before then) at the date of the establishment of the insurer’s register of Singapore policies, the policy owner’s address is or was an address in Singapore;
(b) in relation to direct general insurance (other than short-term accident and health policies) and facultative general reinsurance, a policy in the case of which the risk arises in Singapore or where the insured is a person resident in Singapore or is a permanent establishment in Singapore; and
(c) in relation to treaty general reinsurance, a policy in the case of which more than 25% of the total risks in terms of gross premiums arises in Singapore.
