Expanding to the US? Insurance shouldn't hold you back

Expanding overseas can open up vast markets and offer immense growth potential — a tantalising prospect for any innovative business. As with any bold venture, there are unique challenges and considerations to keep in mind though.

For UK and European scaleups, the US market is often seen as the holy grail. With the election dust starting to settle, could now be the perfect time to kickstart your launch?

The UK, EU and US insurance markets and respective regulatory environments are starkly different. When it comes to insurance, what are the key insurance considerations when you expand to the US?

All cover isn’t made equal

Many companies assume their existing policies will stretch seamlessly across the Atlantic but the reality is often very different.

The US shouldn’t be seen as one country, but instead as 50 separate states. The US regulatory and insurance landscape is complex. Standard UK policies covering property damage, public liability, professional indemnity and employers’ liability are often insufficient.

The three critical insurance challenges companies usually face when considering US cover include:

1. Territorial exclusions

Many UK insurance policies contain territorial exclusions that restrict cover to the UK only, leaving operations in the US unprotected.

For instance, a UK-based company might find that its public liability insurance doesn’t extend to events occurring in the US, both for short-term work travel and if you’re setting up an office.

It's best practice to review policy documentation to ensure it covers all your international activities wherever you are and if not, get yourself proper cover.

2. Jurisdiction-specific requirements

The US insurance landscape is complex, with regulations varying at both the state and the federal level. What is allowed in New York State, will differ from that of California or Texas.

Workers' compensation insurance, for example, is mandated in every state but has different rules and coverage requirements state by state.

A UK company operating in multiple US states must navigate these variations to remain compliant.

3. The more litigious US environment

The US is known for its litigious nature, with higher lawsuit settlements and punitive damages compared to the UK.

A UK business with liability cover of between £5–10 million may find this insufficient in the US, where claims can exceed $20 million.

According to US law firm Novian & Novian LLP, the average a company pays to settle an employment lawsuit in the US before it reaches trial is $75,000. If the claim progresses to court, a pre-trial defence can exceed $125,000.

In 2021, US commercial liability court costs totalled $347 billion, with smaller businesses taking on around half that cost themselves.

Therefore it’s important to adjust your limits so they’re aligned with the US legal environment and mitigate potentially crippling claims exposures.

One country, 50 states

The US operates under a patchwork of state and federal laws, making expanding your operation overseas a little more challenging. Key considerations concerning your insurance policies include managing regulation and compliance.

As touched upon, workers’ compensation insurance is required in nearly every state. It is also regulated on the state level, so each state will have its own requirements and penalties for noncompliance.

Cyber insurance in the US works in a similar way. The US has federal and state-specific data protection laws — like the California Consumer Privacy Act (CCPA) — as well as state-specific breach notification laws​, unlike the UK’s unified GDPR framework.

These regulations often require businesses to carry comprehensive cyber insurance policies to cover potential liabilities.

Another consideration is to include indemnity clauses in contracts with suppliers. This helps manage and allocate risks, making sure you're not held financially responsible for certain liabilities, instead transferring those risks to suppliers or contractors where appropriate.

Indemnity clauses can also be crucial for controlling costs, clarifying responsibility, ensuring legal protection, preserving your reputation and complying or aligning with your insurance.

Once established in the US, your business will need to manage ongoing risks and maintain compliance — as you do here in the UK — as well as develop strategies for handling multi-jurisdictional claims, as state laws can vary significantly.

Cost comparisons

Expanding to the US can be an expensive endeavour, but this can easily be outweighed by the size of the market you’re opening yourself up to. However, the cost of doing business in the US also extends to the price tag on your business insurance premiums.

This higher cost is often due to the increased risks and broader coverage requirements as the regulatory and operational landscape is so diverse. The US insurance market also operates differently, and its underwriting practices and risk assessments differ from those of the UK.

We’ve touched on the litigious nature of the US, so you’ll see your general liability premiums increase as you expand to the US due to the frequency and scale of lawsuits. But there are also other covers you’ll need to consider — take employee health insurance, for example.

After a certain salary threshold, workers and employers in the UK pay National Insurance as standard to cover social services, including the NHS. But in the US, healthcare isn’t “free”, so employers must often provide health insurance under the Affordable Care Act (ACA)​.

The ACA requires employers with 50 or more full-time employees to provide health insurance to at least 95% of their workforce. Failure to comply may result in penalties from the Internal Revenue Service (IRS).

Workers' compensation insurance (as previously mentioned) and professional indemnity insurance are also mandated in certain states or for certain professions.

Partnering with the right broker

Navigating the US insurance market requires expertise in both UK and US systems.

With over 10 years of experience providing insurance for innovative businesses, Superscript’s expert brokers can support by maximising premium savings without cutting corners on cover. We’re authorised in 126 markets and have clients in over 30 countries and every continent.

When you’re expanding to the US, you’re in a fundamentally different risk environment. To set the stage for a successful, secure expansion, you’ll need an experienced team by your side — get in touch today to get the ball rolling.