In many countries, legislation prohibits the insuring abroad of certain risks. Frequently, only locally incorporated companies may do business in the domestic market, thus excluding the provision of insurance directly by the parent company overseas. Placing insurance abroad may, however, be permitted when the local market does not have the necessary insurance capacity. Insurance with companies located abroad may be discouraged through fiscal measures. A number of countries tax premiums paid locally for imported insurance, for instance marine insurance, whereas premiums paid for insurance effected domestically are tax deductible. In the reinsurance sector, the placement of reinsurance directly with an institution located abroad is prohibited or limited in some developing countries. All reinsurance, or a fixed percentage thereof, has to be placed with a local reinsurance entity, normally a public or semi-public institution. As regards freight insurance, another measure is the requirement that imports have to be insured in the domestic market of the importing country. In some countries, a similar regulation exists for exports, requiring insurance in the exporting. Many governments limit direct foreign investment in their domestic insurance sectors. Some require that locally-established companies must be owned and managed entirely by nationals. Frequently, prohibitions are directed against a further expansion of established foreign insurance companies.
Limitations on foreign equity in insurance firms are also a common feature of many national insurance markets. The establishment of foreign reinsurers is excluded in some countries, where all reinsurance must be place with a designated indigenous institution. Foreign insurance companies may, like banking institutions, be required to meet higher capital and reserve requirements than national insurance firms. A number of developing and developed countries do not allow foreign insurance firms to offer certain types of insurance, such as life insurance. Foreign companies may also be subject to higher taxation of premium income. In some countries, requirements and regulations affect the operations of foreign insurance companies by influencing consumer choice in favour of national companies. Thus, it may be obligatory for a person who enjoys any government incentive or subsidy to insure with a national company.