To identify the territory of regulation and tax of a life risk consider:
1. The nature of the cover provided; and
2. The location of the insured’s residence(s) or business establishment(s).
Term life insurance can be taken out either by an individual or a corporate entity.
Where an individual takes out a life policy the risk location is the territory in which the insured is resident.
Where a corporate entity takes out life insurance to cover its staff, the corporate entity is the insured and the risk location is the territory in which its business is established. If the contract covers more than one business establishment, and they are located in different territories, each establishment location will create a separate risk location.
Key person insurance covers an employer against the risk of loss arising from the death, injury or serious illness of a key person employed by its business. The employer is the insured and it receives payment of the claim.
The risk location is the territory in which the business is established.
If the contract covers more than one business establishment and they are located in different territories, each establishment location will create a separate risk location.
Credit life insurance covers outstanding debt owed by an individual against the risk that the individual dies before the balance is paid. It is sometimes called “consumer credit” insurance, along with credit disability insurance and credit unemployment insurance. Unlike trade credit insurance, the contract is taken out and the premium paid by the individual debtor, who is therefore the insured.
The risk location is the territory in which the insured is resident.
Definition of 'business establishment'
European Union (EU) legislation defines the term ‘establishment’. Outside the EU the term is not so well defined, so in the absence of any contradictory guidance, it is appropriate to follow the EU approach.
Examples of business establishments:
- subsidiary companies
- branches of companies
- representative offices
- offices managed by businesses’ own staff
- tied selling agents
- factories and workshops
- mines and quarries
- oil and gas wells
- drilling platforms fixed to sea bed
Risk locator tool
Introduction to Risk LocationWhat is risk location and why is it important ?
Introduction to risk location
Establishing the risk location
To help establish risk location please consider the questions provided via the link below
Class of business guidance
To help you establish the risk location please consider the class of business
Risk Location Examples
The interaction of different territorial rules can make a given scenario complex. Applying the principles set out will assist market participants in establishing the risk location.
Lloyd's International Trading Advice (LITA)
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