Lloyd’s has published guidance for the market on the impact of amendments to the Terrorism Act 2000 (TACT) on kidnap and ransom (re)insurance business. The amendments to TACT were made by the Counter-Terrorism and Security Act 2015 (CTSA), which received Royal Assent earlier this year.

CTSA inserted a new section 17A of TACT, which makes clear that reimbursing terrorist ransoms is illegal and that (re)insurers are prohibited from reimbursing ransom payments made to terrorists. However, the new section does not affect insurers’ ability to resolve kidnapping/hijacking cases where terrorism is not involved (“terrorism” is defined in the TACT). HFW has previously considered CTSA in the Insurance Bulletin (see: http:// www.hfw.com/Insurance-Bulletin-26- March-2015#page_1) and has also published a Briefing on CTSA, which at the time was before Parliament in the form of a Bill. This Briefing can be found here: http://www.hfw.com/UKCounter-Terrorism-and-Security-Billransom-payments-2-November-2014.

Lloyd’s guidance, contained in Market Bulletin YA895, states that managing agents should:

  • Maintain a robust compliance framework.
  • Implement risk mitigation strategies.
  • Carry out appropriate due diligence in order to prevent an illegal payment being made. 

The due diligence should include assessing whether the kidnappers’ actions could give the managing agent knowledge of or a reason to suspect that the actions fall within the definition of “terrorism” and, if necessary, undertaking, or instructing experts to undertake, further investigation into the activities. If any claims payment to be made by the managing agent would reimburse monies paid by to a terrorist, the payment must not be made.

A copy of Market Bulletin YA895 can be found here: http://www. lloyds.com/~/media/files/the%20 market/communications/market%20 bulletins/2015/05/y4895.pdf.