President Obama signed the National Defense Authorization Act for Fiscal Year 2013 into law in January 2013, which includes a section entitled the Iran Freedom and Counter-Proliferation Act of 2012 (the “IFCPA”) designed to expand the current US sanctions regime against Iran in a number of ways. Of significance to the insurance and reinsurance industry, effective July 1, Section 1246 of the IFCPA imposes new sanctions on any person that knowingly provides underwriting services or insurance or reinsurance:
a) for any activity with respect to Iran for which sanctions have been imposed,
b) to or for any person
i. with respect to or for the benefit of Iran’s energy, shipping or shipbuilding services for
which sanctions are imposed under the IFCPA (see IFCPA Section 1244)
ii. for the sale, supply or transfer to or from Iran of precious metals for which sanctions are
imposed under the IFCPA (see IFCPA Section 1245)
iii. subject to sanctions in connection with Iran’s proliferation of weapons of mass destruction
or their delivery systems or Iran’s support for international terrorism, or
c) to or for any Iranian person on the specially designated nationals and blocked persons list maintained by the US Treasury Department’s Office of Foreign Assets Control (other than, in accordance with IFCPA Section 1246(b), an Iranian financial institution that has not been designated for the imposition of sanctions).
The IFCPA includes an exception (other than with respect to sanctions applying to proliferation and support of international terrorism) for persons who exercise “due diligence” in establishing and implementing compliance procedures to guard against engaging in conduct prohibited by the IRCPA.
Subject to the knowledge requirement, and due diligence exception, the plain language of IFCPA Section 1246 has the potential of covering non-US underwriters, insurers and reinsurers, who engage in actions that would be considered prohibited if taken by a US person, including actions by non-US underwriters, insurers and reinsurers, such as surplus lines companies issuing policies in the US. The precise scope of the new prohibitions are unclear as OFAC has not issued any guidance on this point. However, given Washington’s demonstrated commitment to enforcing US foreign policy and security interests which respect to Iran, non-US companies may wish to consider the implementation of compliance procedures with respect to these new prohibitions.
The National Defense Authorization Act for Fiscal Year 2013, which includes the IFCPA, can be found here
We will continue to monitor this topic.