Lloyd’s Market Association releases updated sanctions clauses

Move follows consultation with industry stakeholders, lawyers, and regulators

Lloyd’s Market Association releases updated sanctions clauses

Insurance News

By Terry Gangcuangco

The Lloyd’s Market Association (LMA), whose sanctions clause LMA3100 has seen extensive adoption by (re)insurers internationally for over 13 years, has published LMA3100A and LMA3200 following consultation with industry stakeholders, specialist sanctions lawyers, and regulators.

Referring to the original clause introduced in 2010, the LMA said: “Its purpose is to clarify that insurers cannot provide a benefit under their policy where this would expose them to breaching sanctions in the UK, US, or EU.

“Where the clause has been challenged in the courts, it has stood the test of time. A recent French Court of Appeal case, however, indicated that an update should be considered where the clause is being used in civil law jurisdictions.

“The LMA3100A is the same clause as LMA3100 with a more descriptive title, reflecting that it operates to suspend any coverage that would expose the insurer to sanctions. Concurrently, LMA3200 is being introduced, which is longer in form and specifies agreement between the parties that any coverage that may expose an insurer to sanctions will be suspended.”

According to the trade body, LMA3200 should be easier to enforce in courts in France as it is more narrative and does not need to meet French requirements for the drafting of an effective exclusion clause. Prior to the release of the clauses, the LMA engaged with the French Insurance Association.

“These updates are designed to enhance and give underwriters options for dealing with sanctions across jurisdictions,” LMA legal director Arabella Ramage said. “The LMA remains committed to simplifying insurer adherence to regulatory requirements in a complex regulatory landscape.”

The LMA, which also heard from HM Treasury and the Office of Foreign Assets Control, noted that LMA3200 should be considered an alternative to LMA3100A on international contracts which are not subject to English or US law.

It added: “The LMA also received valuable feedback regarding the need to consider sanctions from other jurisdictions, such as Australia. In response, the LMA has added model language in the guidance note accompanying the publication of the clauses. This would facilitate straightforward modification of the clauses to incorporate other jurisdictions as appropriate.”

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