As previously reported in this blog, President Obama signed into law the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010 (the "Iran Sanctions Act") in July, following the less stringent sanctions passed earlier by the U.N. For a more detailed discussion of the Iran Sanctions Act, see here. Canada, the European Union and Australia soon followed with similar sanctions aimed at Iran's financial and energy sectors. Notably, the Iran Sanctions Act prohibits the insurance and reinsurance by international insurance firms of risks relating to the Iranian petroleum industry, including cargos of oil and petrochemical equipment. And although the Iran Sanctions Act exempts insurers and reinsurers who conduct due diligence, the statute does not specify what underwriters would have to do to satisfy their due diligence requirement.
While the Lloyd's Market Association previously indicated that it intended to comply with the Iran Sanctions Act by not underwriting petroleum shipments to Iran (see here), it was unclear how underwriters could avoid an inadvertent violation of the sanctions. In response, according to a recent article in Business Insurance, Lloyd's has "developed an exclusion clause to help underwriters ensure they do not breach trade or economic sanctions imposed on countries or organizations around the world." It was further reported that "[t]he exclusion says there are instances in which underwriters cannot provide coverage if a sanction is breached and that certain situations, including imposition of sanctions, prohibit insurers from offering cover," according to Neil Roberts, a senior technical executive at Lloyd's, who was interviewed for the article. The new exclusion, developed by underwriters in the marine hull market, will replace the ad hoc wording developed by underwriters in the other markets, Mr. Roberts is reported as stating.