Jurisdiction Exit Planning: A checklist to help insurance groups manage geopolitical risk

Consideration 1: What would you need to move?

First and foremost, you need to establish your exposure to a jurisdiction.

• What do you have from a corporate perspective? Do you have subsidiaries? Do you have branches?
• What do you have from a customer perspective? How will those customers best be looked after?
• What do you have from an asset perspective? Do you have minority investments in local companies? Do you have real estate investments there?
• What do you have from a contractual perspective? Are there joint venture partners with which you have long-term arrangements? Or other local relationships that need to be looked after?
• What do you have from a human resources perspective? Do you have local staff? To what extent would you expect them to exit the jurisdiction?
• What licences do you have with local regulatory authorities? How do you preserve goodwill that has been built-up with them?

Consideration 2: Where is the business that is moving going to end up?

You need to establish which jurisdiction the business that is moving is to end up in. This typically involves an analysis of a number of commercial, regulatory and tax factors, such as:

• Regulatory: local capital requirements; local governance requirements; extent of requirements to have local senior staff; extent it is possible to reinsure outwards to another jurisdiction; extent of local regulatory restrictions on distributions of profits or capital; other onerous local regulatory requirements; responsiveness and consistency of local regulator; overall regulatory environment; how easy or otherwise it is to exit the jurisdiction.
• Tax: corporate tax level; employee tax level; extent of taxation of dividends and other distributions; operation of transfer pricing.
• Commercial: language; currency; availability of local talent; timezone; whether jurisdiction is a sufficiently attractive location for staff to want to live; predictability of local legal system; how restrictive is local employment law.

Consideration 3: How do you get from A to B?

Once you have decided where “B” is, you need to establish what legal mechanisms are available to get you there. This will vary from jurisdiction to jurisdiction, and will depend on the corporate structure of your operations in countries “A” and “B” and on exactly what you have to move, but in our experience the options can include the following:

• Sale of legal entity to a third party.
• Merger of legal entities, with company in jurisdiction “B” being the surviving entity in the merger.
• Cross-border transfer of registered office from country “A” to country “B”.
• Continuation of company in country “A” in country “B”.
• Business transfer of country “A” company’s business to country “B” company.
• Portfolio transfer of country “A” company’s portfolio of insurance contracts to country “B” company.
• Reinsurance of country “A” company by country “B” company, and assumption of all management obligations by country “B” company’s group.
• Establishment of a branch of country “A” company in country “B” and relocation of administration of business from head office to branch.
• Relocation of administration of business from country “B” company’s country “A” branch to its head office.

Consideration 4: Planning implementation of the strategy

Once you have decided where “B” is, and you know the mechanism to get from A to B, there then needs to be detailed planning of what it would take to make the proposal a reality. The areas that we would typically see in this plan would include:

• Obtain detailed local advice on tax, accounting, regulatory and other legal aspects in all relevant jurisdictions.
• Obtain legal advice on the extent to which the chosen transfer mechanism deals with all necessary matters (or whether for example additional steps are needed in relation to particular assets).
• On the basis of the advice received and the commercial goals, building a project plan noting phases and dependencies.
• Establish a governance process, including necessary board approvals, a steering committee and frequency of meetings to drive the project forwards.
• Establish key risks to the project’s completion, timing and budget, and establish a process for recording and managing such risks.
• Plan interactions with key stakeholders to preserve reputation and client (and regulatory) relationships.
• Establish a realistic timescale for completion of the project and the key milestones within it.

Authored by Tim Goggin.