New York Widens its Probe into Possible Iran-Related Transactions by Accredited Reinsurers


    As previously reported here, the New York Department of Financial Services (“DFS”) began a string of investigations last month into possible violations by non-U.S. reinsurers of U.S. sanctions against Iran as set forth in the Iran Freedom and Counter-Proliferation Act of 2012 (the “IFCPA”) that became effective on July 1, 2013.  The DFS has now widened its investigation to include all accredited reinsurers writing business in New York in a new Circular Letter No. 6 (2013) issued on July 24, 2013 (the “Circular Letter”).

    The IFCPA imposes new and expands existing U.S. sanctions against Iran and enlarges extraterritorial sanctions on Iran’s energy, shipping, and shipbuilding sectors. With regard to the insurance industry, IFCPA imposes sanctions against the provision of insurance services (i) for any activity with respect to Iran for which sanctions have been imposed by the IFCPA or any other provision of law; (ii) to or for any person engaged in transactions prohibited under the IFCPA; or (iii) to or for any person on the specially designated nationals list.

    The Circular Letter asks for the same information as the letter previously sent to 20 non-U.S. reinsurers last month, which includes, but is not limited to, the following inquiries:

    • Identify all lines of business, or any other insurance service, that you, your parent, affiliates or subsidiaries write or provide, which may be subject to sanctions under the IFCPA.
    • Explain all policies and procedures in place to ensure compliance with the IFCPA.
    • Provide the Department with representative copies of the relevant compliance policies and procedures.
    • Explain how, when underwriting a policy, you ensure that your underwriters correctly ascertain whether the policy may cover transactions that are prohibited by the IFCPA. Include within your answer how, and to what extent, representations made by a potential insured are verified.
    • Explain what information you require an insured to provide to you regarding each shipment covered by a maritime policy, including: (1) the port of origin of the shipment; (2) the nature of the goods being shipped; and (3) whether the shipment involves or is the for the benefit of a SDN.
    • Explain what rights you have to verify whether an insured’s representation about the  nature of cargo insured under a marine policy is accurately represented and state the  number of time in the last three years that you have exercised those rights.
    • Identify any instance in which you have invoked a sanctions clause to refuse payment of a claim. For each instance, please explain how you became aware of the claim, how the claimant responded, and state whether you currently insure the claimant.
    • List all insureds that you have identified as potentially engaging in business with Iran or any entity or person affiliated with Iran.

    Recipients have until August 16, 2013 to respond to the questions posed in the Circular Letter.

    We will continue to monitor this topic and report on any activity.  We would also be pleased to respond directly to any inquiries or actions on this matter, including the development of IFCPA compliance policies and procedures.

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