Lloyd’s Have Extended Their Sanctions Limitations and Exclusion Clause to Include Australia

Tag Cloud Illustration Related To Economic SanctionsSanctions exclusion clauses and warranties are nothing new and, in fact, are commonly used across the insurance industry as a tool for insurers to mitigate risk arising from the international sanctions regimes to which they may become exposed (e.g. suppliers and /or customers coverage). Wordings vary according to the country of origin.

Lloyd’s have put out a Market Bulletin, No Ref: Y4861 on the subject which covers the subject well. If you would like to down load a copy please click here y4861.

Recently the standard Lloyd’s Market Association (“LMA”) 3100 clause was amended to Australia. The revised wording reads:

SANCTIONS LIMITATION AND EXCLUSION CLAUSE

 

No (re)insurer shall be deemed to provide cover and no (re)insurer shall be liable to pay any claim or provide any benefit hereunder to the extent that the provision of such cover, payment of such claim or provision of such benefit would expose that (re)insurer to any sanction, prohibition or restriction under United Nations resolutions or the trade or economic sanctions, laws or regulations of the European Union, Australia, United Kingdom or United States of America.”

headerOn looking through LMI PolicyComparison.com (Australian version), this type of clause is already in a few different property and professional lines wordings for the past 12 to 18 months.

For example, the following appears in several property policies:

  1. Sanctions regulation

Notwithstanding any other terms or conditions under this policy, [insurer name]  shall not be deemed to provide coverage and will not make any payments nor provide any service or benefit to you or any other party to the extent that such cover, payment, service, benefit and/or any business or activity of you undertake, which would violate any applicable trade or economic sanctions, law or regulation.”

When it comes to professional lines many insurers are introducing a similar clause. For example, Zurich has had it in for the past 12 months or so and it is generally a General condition like the following which is in their Aged Care Liability Professional Indemnity wording. This wording reads:

Sanctions regulation – Notwithstanding any other terms or conditions under this policy, Zurich shall not be deemed to provide coverage and will not make any payments nor provide any service or benefit to any insured or any other party to the extent that such cover, payment, service, benefit and/or any business or activity of the insured would violate any applicable trade or economic sanctions, law or regulation”

Dual use the following as an exclusion, this example is from their Evolution Management Liability wording:

Sanctions Limitation Exclusion – We will not cover the insured for loss to the extent that trade or economic sanctions or other laws or regulations prohibit us from providing insurance.”

Chubb has had the following in their wordings for quite a while, this is a general term in their Management Liability wording

This policy does not apply to the extent that trade or economic sanctions or other laws or regulations prohibit the Company, its parent company or its ultimate controlling entity from providing the insurance.”

I can see such clauses becoming more and more mainstream, starting with Global policies on an ISR, but as yet, it has not become mainstream on property programs in Australia, but watch this space.

Having said that, I really cannot see anything onerous with the wording for Australian or New Zealand business.  It has certainly been the cause of any declination that I have become aware of. In fact, I see it as being prudent and in keeping with the role of insurance. We should not be insuring anything that is against sound public policy.

If anyone has a concern with the wording, I would love to hear about it and the reason for your concern.

I would thank Adam Matteson, Managing Director,  Talbot Underwriting Australia, Brian Peele, LMI Policy Drafting,  and Kristen Waddington of LMI PolicyComparison for there help in researching the subject.

2 responses to “Lloyd’s Have Extended Their Sanctions Limitations and Exclusion Clause to Include Australia”

  1. MO says:

    Hi,
    My only concern is that this clause makes the contract void since inception or from the date of the sanction.
    Thank you.

  2. Robyn Ziino says:

    Hi Alan
    Great reading your insights. Always helpful and thought provoking. Quick question re the amendment to LMA 3100 to include Australia. Did that end up going ahead? I can’t find the amended clause?
    Best wishes,
    Robyn

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