Attention turns to trade agreements for DIC/DIL as IAIS discussions stall

As discussions with the International Association of Insurance Supervisors (IAIS) struggle to gain traction, there is a real opportunity to get multinational insurance regulations, including DIC/DIL arrangements, on the table in a growing number of bilateral or regional trade agreements taking place around the world, according to risk and insurance experts.

This could improve cross-border insurance regulations in the longer term and work as a blueprint if and when multilateralism returns, they add.

Risk managers have long been frustrated by the myriad of regulations around the world that make placing compliant and cost-effective multinational insurance programmes more difficult than they would like. Via the International Federation of Risk and Insurance Management Associations (Ifrima), they therefore launched a campaign to lobby the IAIS to push local regulators to see the value of DIC/DIL cover and accept them as part of their insurance regulations.

But this has been a struggle and there has been little progress to date, said Franck Baron, chairman of the Pan-Asia Risk & Insurance Management Association (Parima).

“We tried at global level with Ifrima to start a sensible conversation on DIC/DIL with the IAIS. It took about two or three years to identify the right people, and we are not getting any traction as yet to be honest, despite all our efforts,” said Mr Baron, who is also group deputy director of risk management and insurance at International SOS.

But it seems there is another potential solution on the cards. Protectionism across many parts of the world has seen multilateralism recede, with knock-on effects for multinational insurance regulations. Multilateralism has been replaced by a focus on bilateral or regional trade agreements, and these are showing signs of hope for buyers of cross-border insurance.

US risk management association RIMS, for example, has successfully lobbied its government to include DIC/DIL in future trade agreements.

The UK and Switzerland recently issued an encouraging joint statement pointing towards an improved cross-border market for services in areas of banking and insurance, particularly for wholesale and sophisticated clients.

And Airmic in the UK is now lobbying its government to consider DIC/DIL acceptance in any post-Brexit agreements with countries like the US and Switzerland.

“We think there are some opportunities for the UK at the moment, with the ability to agree our own free trade agreements. Maybe our eyes should turn to some of the activities at our sister association RIMS in the US and DIC/DIL agreements that could be put in a free trade relationship with the US or other countries. We have been lobbying the UK government to take a look at that and think it should be something on their agenda,” said Airmic’s deputy CEO and technical director Julia Graham.

Madeleine Morris, head of international programmes legal and tax at Zurich Insurance, explained that bilateral or regional trade agreements allow for more flexibility and accountability of the parties involved. Crucially for insurance buyers, these agreements are increasingly including negotiations that relate to services, which could encompass insurance, particularly between sophisticated parties. “This is where we have a chance as an insurance community to make our voice heard,” said Ms Morris.

“There has been success by RIMS to bring this issue and cross-border-friendly trade commitments onto the negotiating table on the US side. It will be interesting to see if the UK government will include similar commitments in its negotiating position for any future UK-US free trade agreement. This would set an important standard of principle for other countries to follow and would ensure international insurance programmes are better able to meet the needs of their multinational customers,” said Ms Morris.

“These examples could offer an opportunity for the insurance community to obtain a more consistent regulatory playing field, albeit in a slow and incremental manner. The inclusion of insurance commitments in bilateral trade agreements could have an important impact on cross-border insurance in the longer term. In fact, looking even further ahead, themes in these bilateral trade agreements, should they actually happen, could provide a new benchmark when we finally see a return to multilateralism,” added the regulatory expert.

She said it is vital that trade negotiators and regulators understand why this issue is so important for multinational companies and global trade.

“People need to appreciate the value to firms in their own market, to see how this reciprocal trade agreement could be beneficial to them.” said Ms Morris.

And she stressed that the voice of insurance buyers is critical. “The voice of the customer is particularly relevant here, because when we speak as insurers it doesn’t always carry the same weight. I think having the voice of a combined insurance industry would go a long way to developing this dialogue,” she concluded.