Strict compliance process still needed over Iranian business as insurance curbs are dropped
By James Brewer
Insurers are being advised that before underwriting Iran-linked risks, they must carry out thorough checks to avoid violating the US sanctions on Tehran that remain in place. Transactions in dollars will still be out of bounds when there is any US element in the business.
The warning has come from Frédéric Denèfle, chairman of the legal and liability committee of the International Union of Marine Insurance, as businesses continue to seek clarity over whether to negotiate potentially attractive deals.
Speaking after IUMI’s winter 2016 meeting in London, Mr Denèfle emphasised that the approach taken by the US and European Union in lifting sanctions has differed.
For non-US insurance or reinsurance companies it will be easier to insure shipowners and exporters establishing business relations with Iran, or based in Iran, as the secondary sanctions have been globally waived. Non-US marine insurers and reinsurers may assess and quote all shipping risks in connection or linked with Iran, or proposed by Iranian-domiciled companies.
This does not mean though that the issue has returned to a normal free trade situation, said Mr Denèfle.
Although it has lifted bans and sanctions for non-US persons, Washington maintains a clamp in some key respects. Embargoes and primary sanctions persist for US insurance and reinsurance companies and their subsidiaries abroad, and any trade between the US and Iran is still forbidden except when expressly authorised by the Office of Foreign Assets Control, the US Treasury Department branch with administers sanctions.
Various markets involved in international insurance, shipping, trade and other marine activities will take an open approach to Iranian risks but will have to monitor closely and perform checks to identify if the risk or the beneficiary is forbidden.
“The scope of forbidden activities, equipment, materials, banned persons and/or companies linked with the Iranian government is still substantial, ” said the IUMI committee chief.
Asked about the potential insurance of oil shipments from Iran, Mr Denèfle said that in principle they were open to be insured by non-US markets, but regard would have to be paid to important details.
Mr Denèfle urged insurers to remain cautious through their internal compliance processes to ensure actions fully complied with the EU and US sanctions regimes.
“We feel we should still use sanctions clauses within our contracts regarding business connected with Iran” in order to comply with the regulations, he said.
“Even if freedom of exchange is re-established with Iran, marine insurers and reinsurers will need to maintain a documented compliance process to verify that their business with Iran does not contravene the sanctions that are still in place as defined by the EU or US.”