On September 23, 2010, David Brummond, Senior Sanctions Advisor for Insurance at the Office of Foreign Assets Control (“OFAC”) in the U.S. Treasury Department, gave a presentation at the HR Litigation Conference on International Economic Sanctions on “Regulation of Business – Important Considerations for Insurance and Reinsurance.” Mr. Brummond’s presentation gave an overview of the role of OFAC with respect to insurance industry related activities.
OFAC administers and enforces US economic and trade sanctions. Mr. Brummond reported that, from January 1, 2006 to August 31, 2010, OFAC handled a total of 179 insurance related cases. Of those 179 cases, 49 were enforcement-related, 25 were inquiries and 105 were license requests. The primary line of business at issue was Commercial Lines P&C which accounted for 67 cases. The remainder of the cases were more evenly distributed over Personal Lines P&C (27 cases), Group L&H (31 cases), Individual L&H (32 cases) and Reinsurance (25 cases). In addition, there were also 2 cases that fell under the “All Lines” category. OFAC’s insurance cases predominantly concerned country-based sanctions with 52 cases concerning Cuban sanctions, 29 cases concerning Iranian sanctions, and 16 cases concerning Sudanese sanctions. The next largest category of cases were list-based programs and there were 33 narcotics cases, 8 WMD cases and 3 terrorism cases. 15 cases were regime-based and 23 concerned all other programs.
An important recent development is the recently enacted Comprehensive Iran Sanctions, Accountability, and Divestment Act, signed into law by the President in July 2010. See our prior blog posts here and here. The law prohibits the provision of services and support that could directly and significantly contribute to the enhancement of Iran’s ability to import refined petroleum products. The prohibition applies to underwriting or contracting to provide insurance or reinsurance for the sale, lease, or provision of prohibited goods, services, technology, information or support. There is an exception under the Act for underwriters and insurance providers that the President deems have exercised due diligence in establishing and enforcing policies, procedures and controls that ensure the insured entity’s compliance with the sanctions regulations. It is not clear how the President will exercise his discretion.