Revelation of Iran's second underground uranium enrichment plant and that country's test firing of two long-range missiles have reinvigorated the Iran sanctions bills introduced in Congress in April. Both the House and Senate versions of the Iran Refined Petroleum Sanctions Act (IRPSA), [1] would amend the Iran Sanctions Act (ISA) [2] to include international insurers and reinsurers among those subject to sanctions. [3] Capitol Hill sources also suggest that Congress may expand IRPSA to encompass persons involved in Iran's weapons of mass destruction program. Because U.S. insurance companies and insurers are already prohibited from engaging in transactions with persons in Iran, [4] the IRPSA is specifically targeting non-U.S. insurance and reinsurance providers.

The current ISA calls for the imposition of sanctions on any person who, "with actual knowledge," makes an "investment" of $20 million or more that directly and significantly contributes to the enhancement of Iran's ability to "develop its petroleum resources." [5] As now drafted, IRPSA would require the President to impose sanctions on persons who, with actual knowledge, provided Iran with refined petroleum resources or engaged in any activity that could contribute to the enhancement of Iran's ability to import refined petroleum resources, including insuring, reinsuring, underwriting, financing or brokering any such activity.

Under the ISA, the President must impose at least two out of a menu of six sanctions on foreign entities that are determined to have made an investment that triggers the statute. The six sanctions available are: (1) denial of Export-Import loans, credits, or credit guarantees for U.S. exports to the sanctioned entity; (2) denial of licenses for the U.S. export of military or military-useful technology to that entity; (3) denial of U.S. bank loans exceeding $10 million in a 12-month period to that entity; (4) if the entity is a financial institution, a prohibition on its service as a primary dealer in U.S. government bonds; and/or a prohibition on its service as a repository for U.S. government funds; (5) a prohibition on U.S. government procurement from the entity; (6) a restriction on imports from the entity. Iran-Libya Sanctions Act of 1996, Pub. L. No. 172, Section 6, 110 Stat. 1541 (1996) (amended 2006).

Under the IRPSA, sanctions available to the President would be expanded to include prohibiting:

(a) Any transactions in foreign exchange by the sanctioned person;

(b) Any transfers of credit or payments between, by, through, or to any financial institution, to the extent that such transfers or payments involve any interest of the sanctioned person;

(c) Any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation, or exportation of, dealing in, or exercising any right, power, or privilege with respect to, or transactions involving any property in which the sanctioned person has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States.

The last of these sanctions in particular would effectively cut access to the U.S. financial system.

Finally, IRPSA requires the President to file certain comprehensive reports with Congress describing the activities of any person engaged in activities that could subject that person to sanctions under the IRPSA. Those reports would be submitted to Congress and published in the Federal Register.

As of today's date, the House and Senate versions of IRPSA have 317 and 75 co-sponsors, respectively. We also understand that the Senate version has been referred to the Senate Banking, Housing and Urban Affairs Committee and the House version has been referred to the Committees on Foreign Affairs, Financial Services, Oversight and Government Reform and Ways and Means. The bills are expected to move reasonably quickly. We will continue to monitor the legislation's progress and provide updates, as appropriate, but urge insurers, reinsurers and brokers to consider what enactment of IRPSA, or an essentially similar bill, would entail for their global compliance programs.