On May 8, 2018, President Donald Trump issued a Presidential Memorandum announcing his decision to withdraw the United States from its participation in the Joint Comprehensive Plan of Action (JCPOA), the agreement under which Iran committed to limiting its nuclear activities in exchange for sanctions relief from the U.S. and others. The Presidential Memorandum directed the Secretary of State and the Secretary of the Treasury to immediately re-impose all nuclear-related sanctions that were suspended when the JCPOA was implemented in January 2016.
The JCPOA significantly impacted the insurance and reinsurance industry. By lifting sanctions once applicable to vast sectors of the Iranian economy, the JCPOA facilitated opportunities for insurers and reinsurers that were previously unable to transact business in or with Iran, or that were required to sacrifice lucrative dealings with U.S. companies in order to do so. Recognizing Iran was ripe for new insurance and reinsurance products, global companies quickly entered the Iranian market. The President's recent decision to withdraw the U.S. from the JCPOA raises concerns as to the continued viability of those transactions. For instance, upon re-imposition of the National Defense Authorization Act for Fiscal Year 2012 (NDAA), U.S. and non-U.S. entities may be restrained from providing insurance, reinsurance or underwriting services relating to any Iranian activity for which certain other sanctions are also being re-imposed. The NDAA will also require compliance with restrictions on the underwriting of insurance and reinsurance risks to or for any person or entity on the List of Specially Designated Nationals and Blocked Persons. Underwriting, insurance and reinsurance services have also been specifically called out by the U.S. Department of the Treasury as areas in which sanctions are being re-imposed. (See 1.3 v.)
Restrictions impacting underwriting, insurance and reinsurance services are expected to take effect after a 180-day "wind-down" period scheduled to end of November 4, 2018. At that time, they will have immediate, far-reaching implications on the ability of non-U.S. companies that transact business in or with Iran to continue such business in the U.S. and with U.S. companies. All companies, insurers and reinsurers in particular, are advised to reevaluate their business risks in light of the Presidential Memorandum, and to take care not to enter any foreign transactions without ensuring compliance with all applicable sanctions.
We are continuing to monitor JCPOA-related developments and will update this post when there is more clarity.
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