Swiss Re, Lloyd’s Among Insurers Probed on Iran Sanction

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Swiss Reinsurance Co. and Lloyd’s of London, the world’s oldest insurance market, are among insurance companies being probed by New York’s insurance regulator about their compliance with an expanded Iran sanctions law.

The state Department of Financial Services is asking the companies about their procedures to avoid violations of the Iran Freedom and Counter-Proliferation Act of 2012, according to a letter from the department obtained by Bloomberg News.

The department, led by Superintendent Benjamin Lawsky, said it learned that several insurers issued coverage that applied to trades made with Iran, including one policy issued by a group of European domiciled companies, according to the letter. The policy and the resulting claim payment “would likely violate the IFCPA,” the department said, referring to the act.

“Swiss Re is aware of its legal obligations and has a robust program in place to assure full compliance,” Michael Gawthorne, a spokesman for the Zurich-based company, the world’s second-biggest reinsurer, said in an e-mail. “Any suggestion that Swiss Re is in violation of trade sanction laws against Iran is without merit.”

In the June 25 letter to the insurance companies, the department said it is seeking information about insurers’ plans for compliance and due diligence to avoid violations of the law. The act was signed into law by Pres. Obama in January. The sanctions related to insurance services took effect on July 1.

“We believe a robust due diligence regime is required to ensure that an insurance company is fully advised of the risks it is taking,” the department said.

The regulator asked the companies for a copy of every policy issued to Glencore Xstrata Plc or Trafigura that will remain in force after July 1, according to the letter. The department cited news reports of “a pattern of trades” made by Glencore and Trafigura with Iranian entities. At least one trade involved Glencore’s shipment of alumina to the Iranian Aluminum Co. in exchange for processed aluminum.

Century Aluminum Co. said in a regulatory filing in March that affiliates of Glencore entered into sales contracts last year with entities controlled by Iran. Non-U.S. affiliates of Glencore, Century’s largest shareholder, entered into sales contracts for wheat and coal and sale and purchase contracts for metals and metal oxides, the company said.

“Lloyd’s will comply with any applicable sanctions, as it always has done,” said a spokeswoman, Caroline Harris-Gibson, at Prosek Partners.

Besides Lloyd’s and Swiss Re, companies contacted by the Financial Services Department include Hannover Re, XL Insurance and Assured Guaranty Re. Representatives of those companies either declined to comment or couldn’t be reached for comment.