How to establish the risk location

In broad terms a risk may fall into one of three categories; property, vehicle or other. The category determines what criteria to use to establish risk location.

Property

Insured property can be either immovable (such as buildings, oil rigs, pipelines, bridges or other structures fixed to land) or moveable.

• Fixed property
  The risk location for immovable property is usually the territory in which the property is situated.
• Moveable property
  In most territories, the risk location for moveable property is where the property is normally situated. However, for regulatory purposes, EEA member states view the risk location as the territory in which the insured is resident or its business establishment is located.
• More than one territory for regulation and tax
  If the contract insures fixed property at more than one location, and those locations are situated in more than one territory, there are multiple risk locations.
  
  It is also possible for the territories of regulation and tax to be different. For instance, in the EEA the regulatory risk location for moveable property is the territory where the insured is resident or has its business establishment, but the tax risk location is where the moveable property is normally situated.
  
  In some territories, e.g. Canada and the US, the location of the insured’s residence or business establishment creates a risk location irrespective of the physical location of the insured property. Consequently, if the insured property is in a different territory from the insured’s residence or business establishment, there are two territories for regulation and tax.  

Please see the country guidance on Crystal for specific risk location rules .

Vehicles

 “Vehicles” include aircraft, ships and other vessels and motor vehicles. The risk location for vehicles may be determined by one or more of the following criteria:\

• Physical location of the vehicle 
• Jurisdiction in which the vehicle is registered
• Location of the residence or establishment of the insured

Please see the country guidance on Crystal for specific risk location rules.

More than one territory of regulation and tax
As one territory’s risk location rules might contradict or overlap with another’s, there may be multiple risk locations.

Other

The ‘Other’ risk category covers risks which are not property or vehicle-related, e.g. general liability and financial loss. 

The risk location is the territory in which the insured is resident or its business establishment is located.

The territory in which an insured peril or event can occur to trigger a claim under the contract does not, by itself, usually create a risk location.

More than one territory of regulation and tax
The contract may have more than one territory of regulation and tax if:

a) The rules of different territories conflict or overlap; 

b) The contract is taken out by more than one individual insured, and the individual insureds have residences in more than one territory;  

c) The contract is taken out by a corporate entity and it covers the entity’s business establishments in more than one territory. This includes contract taken out by the head office of a group, covering the group’s subsidiaries in different territories.       

Please see the country guidance on Crystal for specific risk location rules.

The insured is the party entering into the insurance contract with the insurer(s).

An insured may be a natural person or a corporate entity. The location of the insured may create a risk location.

Natural person(s)

The location of a natural person is the territory in which they live. Legally, this is described as the territory of their “habitual residence” – see Article 13(13)(d) of the EU Solvency II Directive.

The insured’s habitual residence can usually be taken to be the insured’s address shown on the slip or Market Reform Contract (MRC).

“Habitual” residence relates to the insured’s overall situation at the time they take the contract out. A person who has lived for several years in country A and takes out an insurance policy just before moving to country B is “habitually resident” in country A. Generally, if a person lives in a country for over a year they are deemed to be “habitually resident” there.

Corporate entity

The location of a corporate entity is the territory in which it is established.

The insured’s establishment is often the insured’s address shown on the slip or Market Reform Contract. However, policies taken out by corporate entities can be more complex than those taken out by individuals. For example, the “Insured” shown on the MRC could include subsidiary companies as well as the parent company. Each subsidiary company independently creates a risk location, in addition to the risk location of the parent company. This is the case even if a parent company arranges the insurance and pays the premium on behalf of its subsidiaries.

For example, the MRC may define the insured in terms such as:

“XXX Corporation Inc. and any subsidiary of XXX Corporation”

This means that XXX Corporation and all its subsidiaries wherever established are insureds under the contract. Depending on the nature of the risk insured and the territories involved, the address of XXX Corporation and of each of its subsidiaries may create separate risk locations.         

In addition, “establishment” includes other permanent presences of a corporate entity, not amounting to a separate subsidiary – see the list below. If a corporate entity has insured more than one establishment and these are in different territories, there will be multiple risk locations.

Examples of establishments include:

• branches of companies
• representative offices
• offices managed by the businesses’ own staff or by independent persons who have the authority to act for the business as an agency would
• tied selling agents (independent persons who have the authority to act for the business)
• factories and workshops
• mines and quarries
• oil and gas wells
• drilling platforms that are fixed to the sea bed

An establishment must have some degree of permanence. For example, a construction site would only be considered an establishment if it lasted for more than one year.

A policy that covers a risk located in more than one territory is a global contract.

Strictly speaking, the location of intermediaries does not affect the risk location, so is not referred to throughout this guidance. However, in some territories the location of an intermediary involved in placing an insurance contract can create regulatory or tax responsibilities and so the location of intermediaries should be taken into account.

Please see the country guidance on Crystal for specific risk location rules.