Financial Interest Cover (FINC) Clause
The FINC clause indemnifies the parent company of an international programme for the diminution in value of its interest in a subsidiary that suffers an otherwise covered loss in a country where non-admitted insurance is prohibited.
- Clause type
- Extension
- Origin/Market
- International programme
- Favours
- Insured
- Negotiability
- Negotiable
Purpose
Where a subsidiary is located in a country that prohibits non-admitted insurance, the master policy cannot cover it directly, and a local policy is often unavailable. The Financial Interest Cover (FINC) clause closes this gap by insuring not the subsidiary itself but the parent company’s financial interest in it: if the subsidiary suffers a loss that would otherwise be covered under the master policy, this is treated as a reduction in the value of the parent’s interest, for which the parent is indemnified.
Effect and limits
Indemnity flows only to the parent company in the country where the master policy is held, not to the local subsidiary; transferring funds onward to the subsidiary can trigger its own tax and regulatory consequences and must be checked in advance. FINC does not replace local claims handling, premium collection or tax settlement functions of an admitted policy and remains legally untested in many jurisdictions.
Negotiation and practice
FINC clauses are usually negotiated as a fallback alongside, not instead of, local policies, particularly where a market temporarily does not permit local underwriting. In layered programmes it must be clarified whether all participating insurers support the clause, as it otherwise fails to operate consistently across a tower structure.