WASHINGTON — Canadian cross-border carriers will no longer need to be insured by a U.S. company or maintain a policy "reinsured" by the American issuer.

The Federal Motor Carrier Safety Administration officially published a final rule that eliminate the need for Canadian insurance companies to link with a U.S. insurer to legally cover Canada-domiciled motor carriers operating in the U.S.

FMCSA stated, however, that there would be no change in the minimum insurance levels required of Canadian carriers hauling down south.

Until now, Canadian trucking carriers had to maintain policies issued by U.S. insurers either directly (and thereby maintain two separate polices) or through a "fronting agreement" where the risk is "reinsured" back to the Canadian provider by the American firm.

The latter is the most common, but adds expense and administration costs to the 9,000 or so Canadian carriers that haul down south.

The rule changes, which were requested by the Canadian government, insurance companies and the Canadian Trucking Alliance, will take effect on August 2.

FMCSA sympathized with Canadian companies that noted the inappropriateness of imposing burdensome requirements on carriers and Canadian insurers that Canada does not impose on Americans.

While it generally approved of the rule changes, the American Trucking Associations did argue that Canadian insurance companies should be required to comply with all the same federal and state-by-state requirements for U.S.-based insurers, even though, as the ATA acknowledged, it would be difficult to do and possibly discourage carriers from participating in the U.S. market.

However, FMCSA ruled that such a requirement would be unnecessary and contrary to the purpose of this rulemaking.

"FMCSA leaves it up to the States to monitor U.S.-based insurance companies and … would leave it up to the
Canadian government and its provinces and territories to monitor Canada-based insurance companies in the same manner."

Further, FMCSA says Canada "has a very strong, prudential federal regulator of its financial institutions" and the "Canadian government and the insurance companies it regulates have demonstrated that they have the ability … to honor their financial obligations without the need for any additional oversight."

As well, the agency says it is engaged in an on-going process with its Canadian counterparts to identify opportunities for establishing reciprocity to achieve a seamless motor vehicle liability insurance policy … between the two nations."