Insurance: US Sanctions Impact Insurers Involved in the Refined Petroleum Trade with Iran

New US sanctions that came into effect on 1 July 2010 have dramatically extended the scope of restrictions against Iran and will have a direct impact on the insurance market.

The Comprehensive Iran Sanctions, Accountability and Divestment Act imposes sanctions on any person who knowingly helps facilitate the supply of refined petroleum products to Iran, which includes providing shipping, insurance, or financing services for such activity. "Person" is widely defined to refer specifically to financial institutions, insurers, underwriters, guarantors and any other business organisation. The Act also confirms the liability of successor entities, parents and affiliates of an entity that engages in sanctionable conduct.

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Full Article

The Comprehensive Iran Sanctions, Accountability and Divestment Act ("the Act") came into effect on 1st July 2010, and dramatically extends the scope of restrictions against Iran, with a direct impact on the insurance industry, imposing sanctions on any companies that knowingly help facilitate the supply of refined petroleum products to Iran, which includes providing shipping, insurance, or financing services for such activity. It also establishes additional sanctions prohibiting specified foreign exchange, banking, and property transactions.

Background

In 1997 President Clinton signed Executive Order 13059 which brought into force a prohibition on virtually all investment and trading activities with Iran by US persons, wherever located. A breach can lead to a fine of up to $1,000,000 or imprisonment of up to 20 years.

In general, unless licensed by OFAC (Office of Foreign Assets Control), goods, technology or services may not be exported, directly or indirectly, from the United States, or by a US person or company, wherever located, to Iran. The ban on providing services includes any brokering function (including insurance). Goods or services of Iranian origin also may not be imported into the United States, with only a few exceptions. All US persons are prohibited from providing financing for prohibited import transactions, which includes any type of insurance.

The Act

The Act substantially extends the activities covered by sanctions under current law to include efforts by foreign companies to:

sell, lease, or provide to Iran any goods, services, technology, information, or support that would allow Iran to maintain or expand its petroleum refineries; or supply refined...