October 21, 2018 by Greg Meckbach
Commercial brokers advising Canadian clients with operations in foreign countries need to understand consumer protection and pollution laws in those countries.
“It’s up to a broker to make sure that he or she is well versed in what those countries’ rules and regulations are. You have to be absolutely sure that you are keeping up to date with the changing regulatory environment,” said Graeme Condie, global customer leader for Allianz Multinational at Munich-based Allianz Global Corporate and Specialty.
Other countries are implementing new laws to protect the environment and consumers. Those new laws could have insurance implications for Canadian firms operating in those countries, said Condie, who works out of London, England.
This could affect, for example, a Canadian firm that operates a factory in Mexico. That firm could be at risk of being sued or being penalized by regulators, Condie said Friday in an interview.
“The consumer in Mexico or in China is no different than the consumer anywhere else. Local regulators see the need to protect consumers. They see the need to respond to the real challenge of defective products, or poor performance in terms of environmental protection.”
Some countries – Mexico and China for example – “are becoming litigation hot spots,” said Condie. “Laws and regulations are being implemented for consumer protection and that has an effect on the insurance market and insurers generally.”
Some insurers have databases on local regulations which the insurers update regularly, said Condie.
Canadian companies in any sector of the economy – especially mining, construction and pharmaceutical – could have operations outside of Canada.
Changes to local laws could affect environmental impairment liability, Condie said.
Pollution is generally not covered in commercial general liability insurance policies, especially if the client occupies land that is known to have been contaminated for decades. In Ontario, the Ministry of the Environment has the power to order a corporation with “management or control” of a property to clean up pollution or reimburse the MOE if the ministry cleans it up. The MOE can also issue such an order to an individual, such as a director or officer.
“It is probably safe to say this is happening in other countries,” Condie said of regulators’ power to impose pollution clean-up orders. “They see the need to protect the environment more and hold people to account even for legacy environmental issues.”
Some Canadian firms with overseas operations have a risk manager in Canada who goes to a commercial insurance broker in Canada to cover risks in various locations across the world, Condie said.
If you are advising clients, like this, you need to think about the risk of natural catastrophes – such as earthquake and wind storm – in the countries in which your clients operate, Condie said. You also need to consider risks like cyber and product recall.