The location of risk is determined by the insured’s location. Usually these products are purchased by companies or other corporate bodies. The location of risk is then determined by the location of the insured’s business establishment most closely associated with the risk and not the location of the event that leads to the financial loss. If the insured is an individual, their location is the jurisdiction in which they are domiciled.
'Miscellaneous financial loss' includes:
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Kidnap and ransom
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Extended warrantees
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Contract frustration
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Political risk (see separate guidance)
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Confiscation risk
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Insufficiency of income
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GAP
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Bad weather
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Loss of benefits
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Continuing general expenses
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Unforeseen trading expenses
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Loss of market value
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Loss of rent or revenue
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Other forms of financial loss.
Global contracts
A Global contract is a contract insuring risks located in more than one country.
A miscellaneous financial loss insurance contract is a global contract if it is taken out by a corporate body and covers other corporate bodies or other establishments as well. The contract may refer to specific named entities or may state that all subsidiaries, associated companies, branches (or other forms of establishment) are covered under the policy.
When identifying the location of risk for a contract covering a single corporate entity its branch structure and other types of establishment associated with the risk should be considered even if they are not specifically referred to in the contract. “Establishments” are discussed in detail here.
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.
