Multinational insurance: Understanding the limits and opportunities of Freedom of Services (FoS) solutions

Freedom of Services (FoS) is a well-established legal mechanism that allows an insurer licensed in one EU country to provide admitted cover across the European Economic Area (EEA). In a nutshell, FoS offers a simple and cost-effective way for multinationals to cover insurance risks consistently across multiple EEA countries.

While relatively straight-forward, FoS solutions do come with requirements. The insurer must be licensed in an EEA country and registered for FoS business in any other EEA countries where it wishes to offer coverage. Insurers must also comply with country-specific insurance regulations—such as compulsory insurance, state pools, reporting requirements and claims processes – as well as local legal and tax rules. And it varies by country, who must remit the applicable tax (insurer, broker or insured).

Evolving application

An established tool for multinational programs since the 1990s, the application of FoS is evolving. A changing risk and compliance landscape has raised questions around the application of FoS solutions in recent years and contributed to an increasing preference for local policies.

Historically, FoS solutions are an efficient way for multinational companies to purchase admitted insurance in EEA countries, especially where their exposures are relatively light and their claims servicing requirements are low. However, many multinational companies have seen their exposures change in recent years with a shift from globalization to hyper-localisation, nearshoring and homeshoring. As investments in EEA-based operations and supply chains increase, so do the exposures to major loss events – such as storms, floods, fires and explosions.

At the same time, the application and enforcement of local insurance and tax rules have evolved in many EEA countries, creating additional complexity for multinational programs in recent years. In particular, a growing number of European countries have expanded or introduced natural catastrophe insurance schemes, ranging from state-backed pools to mandatory insurance. Each of these national arrangements place reporting and administrative requirements on insurance, including those policies written on an FoS basis.

The right solution for the risk

With these regulatory and exposure developments, the use of FoS within a multinational insurance program is becoming more nuanced. For example, recent extreme weather events highlighted potential challenges for FoS. Each and every EEA country has its own insurance requirements and failure to fully comply - such as the inaccurate calculation of local pool contributions - can cause delays, and even non-payment of claims.

And with increasingly large and complex operational and supply chain exposures, many organisations may consider they are better served by local claims handling expertise and capabilities. When a policy is provided on an FoS basis, claims may not always be handled in the country in which the loss occurred. In contrast, a local policy would give the insured access to local claims expertise and handlers that are familiar with local market practices and regulatory requirements. But this isn’t the only consideration.

Exposure led process

While FoS placements remain an efficient solution for multinational companies, the demand for local policies is on the rise, particularly as multinational customers’ needs become more complex and sophisticated.

Program design should start with the insureds’ specific needs in each territory, with a particular emphasis on exposure analysis. When evaluating the need for local policies compared to a FoS solution, risk and insurance managers should consider the following:

• Are there large or critical exposures in a given country?
• Is there a history of claims frequency or severity?
• Do local tax and insurance requirements make it more complicated to collect local premium taxes?
• Can my FoS insurer accurately calculate the contributions to national insurance pools or compulsory insurance schemes for all FoS countries where we have exposure?
• Are standard wordings or local language policies needed?

Even when local policies are selected as the appropriate solution, FoS can continue to play a key role. An FoS master policy can be used to compliment the program, providing difference in conditions (DIC) and difference in limits (DIL) cover to unify coverage and limits. And by centralizing the FoS master policy implementation, organizations can deepen their expertise, enhance claims management and strengthen compliance and contract certainty.

Future for FoS

Increasingly, local policies are seen as the most appropriate solution for multinationals with significant EEA exposures and more complex local needs. That said, FoS, remains a valuable solution when used appropriately and when designed and implemented by experienced expert insurance practitioners.

Risk managers should be tapping into knowledge and expert advice from their insurers and brokers when making decisions around the most appropriate multinational insurance solution to suit their needs. It is also important to select insurers that have the footprint and administrative capabilities to execute multinational programs, from diligent crafting of a sustainable multinational solution that suits insured’s individual needs and organizational requirements, calculating premium allocations, taxes and contribution to national pools, to managing claims. Zurich Insurance, for example, has a dedicated FoS Network Center in Madrid managing the issuance and administration of FoS policies.

FoS will continue to be an important part of the multinational insurance toolbox, but going forward, risk and insurance managers need to have a clear understanding of the pros and cons of FoS solutions. For many it will still be the appropriate choice but for some, there may be other, more appropriate alternatives available.

Originally published in Commercial Risk on April 7, 2026.