Individual term life insurance
An individual term life insurance contract is taken out by an individual person and pays a claim in the event of their death. The location of risk is determined by their country of residence at the time the contract is taken out. This is usually the “insured’s address” on the contract documentation.
Group term life insurance
A group term life insurance contract is usually taken out by a business and insures the lives of its employees, providing their dependents with a financial settlement in the event of an employee’s death. The location of risk is determined by the country in which the insured business has an establishment at which covered personnel are employed. Further guidance on establishments is available here.
If employees covered by a contract are mobile, and their place of employment is not limited to a single country, one should seek to identify the location at which it is reasonable to view them as being “based”, even if they do not spend the majority of their working time there. If this is not possible, it is reasonable to view the location of risk as determined by the insured business’s main or head office.
Keyman insurance
A keyman insurance contract is usually taken out by a business and insures the lives of key persons connected with the business, paying a claim to the business in the event of the insured person’s death. The location of risk is determined by the country in which the insured business has its main business premises or head office. This will usually be the “insured’s address” on the contract documentation.
Global contracts
A global contract is an insurance contract insuring risks located in more than one country.
Global contracts – group term life insurance
A group term life insurance contract is a global contract if the business taking it out has subsidiaries, associated companies or establishments in more than one country and the contract covers employees working at locations in more than one country.
Example
A charity based in the UK arranges a group term life programme covering all its employees. Its employees are based in the UK and in South Africa. Some of its UK-based staff members are mobile, moving from country to country.
The contract is a global contract, with risks located in the UK and South Africa. The premium must be apportioned between the UK and South Africa. The mobile staff members should be treated as located in the UK.
Global contracts – keyman insurance
A keyman insurance contract is a global contract if it is protecting the interests of more than one entity, and those entities are located in more than one country. For example, if a contract includes in the definition of “insured” subsidiaries and associated companies based in other countries and it covers the interests of those other companies in key personnel.
The location of the insured key person is not, in itself, relevant. The contract is insuring the company’s interest in a key person, not the key person themselves.
Example
A UK-based company takes out a keyman insurance contract, covering a person based in the US. The risk is located in the UK.
Premium apportionment
A global contract may give rise to regulatory and tax exposures in different jurisdictions. Compliance with these requirements requires the overall premium to be apportioned between the countries in which risks are located. Guidance on premium apportionment is provided here.
