International sanctions have been part of the landscape of the insurance industry for many years, but recently they have been growing in importance for obvious reasons.

Sanction-related regulations are multifaceted and have been enacted at various levels, from the UN (there have been over 30 sanctions regimes adopted by the Security Council) to the EU (numerous regulations were adopted after the annexation of Crimea by Russia) and its member states (eg. the Polish Parliament’s own sanctions act supplementing the EU’s). Additionally, there are also separate US and UK regulations.

Obligations stemming from the sanctions inevitably impact insurers. However, doubts have arisen due to the nature of their business. For example, how to define the prohibition on the making available of funds (financial resources) and economic resources stemming from Article 2(2) of EU Regulation 765/2006 and Article 2(2) of EU Regulation 269/2014 when it comes to insurers.

There is a debate as to whether this only includes activities in the conclusion of new insurance contracts, payment of compensation, or return of overpaid premium, or if the continuation of insurance coverage resulting from insurance contracts concluded earlier (with all payments frozen) is also forbidden. We are also facing questions from our clients around how to navigate claims made against policies taken out by sanctioned entities, namely in which cases are insurers permitted to pay out. For example, if the beneficiary of a policy taken out by a sanctioned entity is not under sanctions themselves, should they be paid? And if unsanctioned entities claim against policies taken out by sanctioned parties, should they be paid?

Given the lack of clarity on these questions – and many others resulting from the sanction regulations – there are still doubts being raised among insurers and local regulators. While a uniform approach would be desirable, whether or not it is achievable remains to be seen.

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