Re/insurers wary of European sanction relief

European re/insurers are wary of the recent sanction relief surrounding coverage of Iranian oil exports. That is the opinion of John Markham, an associate specialising in competition law and Alaina Wadsworth, an associate in the insurance and reinsurance Group from law firm CMS Cameron McKenna.

“There are many reasons why this is less exciting than it might seem,” said Markham. “A lot of re/insurers may be wary because there are lots of aspects where what is allowed might be complicated. There’s also still a US regime in place.”

The relaxation, which began on January 20 and will lapse on July 20, provides relief for the import, purchase, transport and insurance of petrochemical products from Iran.

Further confusion surrounds the relaxation as several companies, including Tehran's top oil tanker group NITC, remain under sanctions.

“This relaxation does not allow any dealings with prohibited institutions and individuals in Iran, so if you’re dealing with them, you will still have a problem. The scope of what is prohibited isn’t quite clear,” added Markham.

Wadsworth agrees. “It’s still quite vague. The implications only relate to certain countries, which adds further confusion for re/insurers. Also, as the current legislation is only for six months, it’s unclear what would happen about paying claims after those six months; even if the loss occurred within that period.”

The current relaxation will end on July 20, six months after its inception. However, the EU may choose to renew it after this period.

“If the EU decides to extend the ban relief after the six month period, it has to be expressly renewed, so it will lapse,” said Wadsworth. “Equally, it can be brought to a close at any time if Iran falls foul of its promises surrounding nuclear programme involvement.”

The UN nuclear watchdog, The International Atomic Energy Agency (IAEA), is responsible for ensuring that Iran continues to curb its most sensitive nuclear work.

While sanction regimes have been in Iran for some time, this latest amendment has created somewhat of a minefield for the industry.

“Tinkering with a sanction regime is common, however because of the political background, the whole area is unpredictable,” said Markham.

“Once the parameters are a bit clearer – if they decide to continue the relaxation past the first six months, I think we will see more movement.”