The recent relaxation of sanctions against Iran opens up opportunities in a potentially significant market for London Market (re)insurers. Underwriters and brokers are well advised to tread carefully, however, in view of the sanctions which remain in place, most notably sanctions imposed by the US, with US companies (including UK subsidiaries of US corporates) remaining broadly prohibited from engaging in transactions involving Iran.
On 16 January 2016 (known as “Implementation Day”), EU sanctions against Iran were eased under the terms of the Joint Comprehensive Plan of Action (JCPOA) agreed last July between the E3 + 3 (UK, France, Germany, US, Russia and China) and Iran. For more detail on the sanctions that have been lifted see our Law-Now.
Amongst those sanctions that have been lifted is the EU embargo against the provision of insurance to Iranian entities and Lloyd’s has issued a Market Bulletin confirming that the (re)insurance of Iranian petroleum and oil products is now allowed. The direction in the Market Bulletin issued by Lloyd’s on 8 July 2010 (Y4409), requiring managing agents to ensure that no contract of (re)insurance was entered into, amended and/or endorsed, where they knew or ought to have known, that an Iranian Refined Petroleum Risk would be (re)insured under the contract, is therefore rescinded.
The US has also eased sanctions on Iran in respect of the oil and shipping sector. However the easing of such sanctions principally targets non-US persons conducting business with Iran and save for limited exceptions, the general trade embargo remains in place for US companies.
According to a recent publication by the Insurance Journal, the insurance market in Iran is worth $7.4 billion in gross written premium, and unsurprisingly, the easing of sanctions has led to insurers reportedly expressing interest in opportunities to enter the market. It is being reported that Iranian companies’ insurance contracts are expected to expire at the end of the Persian year in late March when insurers’ risk appetite in the territory will be tested. Underwriters and brokers should, however, adopt a cautious approach, particularly where there is US involvement.
EU companies which are owned or controlled by US corporations will fall under US jurisdiction and will therefore continue to be subject to US primary sanctions. However, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) through their issuing of General License H, authorises non-US entities to engage in business with Iran, subject to certain exemptions and restrictions including strict limitation on the extent of involvement of the parent company.
A further risk for insurers and brokers alike to consider is the possibility that Iran violates its undertakings in the JCPOA. In such a case the EU has reserved the right to re-impose sanctions on Iran – the so called “snapback” provisions. Insurers who have contracted with Iranian companies may therefore find themselves bound by insurance contracts which they cannot perform.