Sanctions Update – Ukraine

The US, UK, and EU have added individual and entity names to their respective sanctions lists. Those names should be added to each managing agents’s sanctions lists for automated screening effective immediately. All names associated with new policies should be screened against the updated lists and added to automated post-bind screening. Screening should also be conducted prior to any transactions, including claims and return premiums. Any policy with a true match should be escalated to LIC Compliance, any transactions stopped, and the sanction clause should be invoked to terminate the policy.

Managing agents should review their portfolio and identify any exposure to the newly sanctioned names. Any exposure found should be escalated as soon as possible to LIC via LloydsEurope.FinancialCrime@lloyds.com.

Applicable sanctions include economic restrictions on specific territories. As per (EU) 2022/263 It is prohibited to:

(a)    import into the European Union goods originating in the specified territories [of the separatist regions Donetsk and Luhansk];

(b)    to provide, directly or indirectly, financing or financial assistance as well as insurance and reinsurance related to the import of the goods referred to in point (a).

In order to comply with applicable sanction regimes, managing agents should ensure no risk is written which exposes LIC to sanctioned territories. Wherever possible, screening systems should be updated with relevant geographic indicators such as city or port names to identify those regions and reject any associated risk. Exposure to geographical sanctions should be considered for every new business, policy renewal, as well as any transactions (including claims and return premium). New business directly subject to applicable sanctions should be rejected. Business which is subject to a license should be notified to LIC Compliance.

As per normal procedures, any managing agent able to identify such exposure in their existing portfolio should notify LIC immediately.

Managing agents should ensure no risk is written which exposes LIC to sanctioned sectors. This means exposure to geographical sanctions should be considered for every new business, policy renewal, as well as any transactions (including claims and return premium). New business directly subject to applicable sanctions should be rejected. Business which is subject to a license should be notified to LIC Compliance.

(EU) 2022/328 imposes restrictions on various types of goods and technology, as well as providing financial services (including insurance) related to those goods and technology to any person, entity or body in Russia or for use in Russia. Those primarily include:

• Oil refining technology
• Dual-use goods and technology·
• goods and technology which might contribute to Russia’s military and technological enhancement, or the development of the defense and security sector
• Goods and technology relating to the energy sector
• Goods and technology suited for use in aviation and the space industry

Restrictions have been imposed on various types of goods and technology, as well as providing financial services (including insurance) related to those goods and technology to any person, entity or body in Belarus or for use in Belarus.

LIC is subject to the UK sanctions regime through its direct relationship to Lloyd’s and because of LIC’s reinsurance of business to Lloyd’s syndicates.  Also, UK sanctions rules apply in full to the LIC UK branch’s activities forward. UK rules are therefore applicable to LIC, directly and in full.

21 February
Five Russian banks and three high net worth individuals added to the sanction list. The sanctions include asset freezing restrictions and a travel ban.

25 February
Vladimir Putin and Sergei Lavrov added to the consolidated list.

VTB Bank added to the consolidated list, with a license for winding down operations until 27 March.

28 February
New names added to the consolidated list.

1 March
New names, including Belarusian entities and individuals, added to the consolidated list.

New restrictions on the Central Bank of Russia, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation.

• The Russia (Sanctions) (EU Exit) (Amendment) (No. 5)

Prohibition to provide financial services (including insurance) in connection with critical-industry goods and dual-use goods.

• The Russia (Sanctions) (EU Exit) (Amendment) (No. 3)

HM Treasury has further announced measures specifically targeting the insurance and reinsurance market, including preventing Russian companies in aviation and space industry to access the UK insurance sector.

The latest added names can be found on the OFSI page.

The consolidated list can be accessed here.

LIC relies on DXC for the processing of premiums, and DXC being a US person it is directly subject to US sanctions. This means that any transaction that contravenes those sanctions will be rejected by DXC and should therefore not be submitted.

Where a policy is identified within an managing agents existing portfolio which is subject to US sanctions, this should be escalated immediately to LIC Compliance.

21 February
New Executive Order which prohibits US persons from engaging in new investment, trade, and financing in Donetsk and Luhansk. Several licenses issued along the EO.

22 February
New Russian individuals, institutions, and vessels added to the list of Specially Designated Nationals (SDNs).

23 February
NordStream 2 and its Managing Director added to the list of SDNs. Primary Sanctions applicable to US Persons (including (re)insurance services), and risk of secondary sanctions to non-US persons. General License issued for firms to wind down all transactions with NS2 by 2 March 2022.

25 February
New sanctions on Vladimir Putin and Sergei Lavrov.

28 February
New restrictions on the Central Bank of Russia, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation.

Temporary license until 24 June 2022 on transactions related to energy.

OFAC’s 50 Percent Rule states that the property and interests in property of entities directly or indirectly owned 50 percent or more in the aggregate by one or more blocked persons are considered blocked.

As per DXC’s communication, sanctions procedures are being updated to reflect the new restrictions.

As per normal procedures, any managing agent able to identify such exposure it their existing portfolio should notify LIC immediately.

As a Belgian insurance company regulated by the NBB, EU sanction rules are applicable to LIC immediately and in full.

23 February
Members of the Russian State Duma and additional high profile individuals added to the added to the consolidated list of sanctions.

• Council Implementing Regulation (EU) 2022/260 and 2022/261

Trade sanctions on the two separatist regions of Donetsk and Luhansk, including (re)insurance of goods originating in the specified territories

• Council Regulation (EU) 2022/263.

25 February
New measures (including insurance services) on dual-use goods, oil refining technology, aviation & space technology.

• Council Regulation (EU) 2022/328

New names added to the consolidated list of sanctions.

• Council Implementing Regulation (EU) 2022/332

28 February
Extension of the scope of Council Regulation (EU) No 269/2014

New names added to the consolidated list of sanctions.

• Council Implementing Regulation (EU) 2022/336

Prohibition on any transactions with the Central Bank of Russia.

• Council Regulation (EU) 2022/334

2 March
New names added to the consolidated list of sanctions

• Council Regulation (EU) 2022/353

Expansion of the scope of Regulation (EC) No 765/2006 on restrictive measures against Belarus

• Council Regulation (EU) 2022/355

The latest EU sanctions can be found on the Official Journal.

Considering the most recent developments, further rulings are expected, and communications will follow quickly as the situation evolves.