Insurance of buildings and immovable property
The location of risk is the country in which the insured property is located.
Insurance of contents and movable property
The location of risk is the country in which the insured property is located, except in the following circumstances:
- European Economic Area (EEA): If an insurance contract covers the contents of a building in the EEA, the location of risk may be different for regulatory and for tax purposes:
- For regulatory purposes, the location of risk is determined by the insured’s location.
- For tax purposes, the location of risk is determined by the location of the insured property.
This applies only to contents insured on their own. If contents are insured together with buildings, the location of risk for both tax and regulatory purposes is the country in which the building is located.
- South Africa: In South Africa, insured movable property is a South African risk if the insured is located in South Africa, irrespective of the location of the property.
- US (Illinois): In Illinois, insured movable property at a fixed location is an Illinois risk if it is situated in Illinois. If insured movable property is not at a fixed location, it is an Illinois risk if the insured is located in Illinois.
Global contracts
A global contract is an insurance contract insuring risks located in more than one country.
A property insurance contract is a global contract if:
1. It insures buildings or immovable property situated in more than one country.
2. It insures contents or movable property situated in more than one country. If the contents are located in EEA member states, and there is a single insured, the insurance is a global contract for tax purposes, not for regulatory purposes. If there is a single insured in South Africa or Illinois, under South African or Illinois law the entire contract is South African or Illinois, but other jurisdictions will view the insurance as located, in part, in their own country.
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.
For global property insurance contracts, it would be reasonable to apportion the premium between countries based on the value of the property at risk in each country.
