LMA launches new model clause to boost sanctions compliance in re/insurance contracts

The Lloyd’s Market Association (LMA) has launched a new model clause, LMA5670 – General Sanctions Financial Crime Documentation Clause, designed to strengthen sanctions compliance in reinsurance and insurance contracts.

This measure aims to empower re/insurers and brokers in navigating the increasingly intricate and rapidly evolving landscape of sanctions and finance crime regulations.

The new clause introduces a contractual obligation for re/insureds to provide documentation upon reasonable request, particularly to deal with situations where such obligations arise mid-contract.

In turn, this ensures that the market has the tools to adapt swiftly to the ever-changing international sanctions environment.

The clause is intended to provide insurers and brokers with an added layer of protection and to “future-proof” their contracts by:

• Giving contractual rights to access documentation from their insureds as necessary to confirm no exposure to sanctions or financial crime regulations;
• Minimising the burden on re/insureds by limiting such requests to information that is reasonably required, accessible through best efforts and not outside their control; and
• Automatically discharging the contract in cases where the insured has not cooperated appropriately – aligning with recent requirements from the UK authorities.

Arabella Ramage, Legal and Regulatory Director at the LMA, commented: “This clause is a practical and proportionate response to the increasing demands placed on our market by sanctions legislation. It provides clarity and contractual certainty for all parties, while ensuring that compliance obligations can be met without unnecessary disruption. Importantly, it also recognises the critical role of brokers in the compliance chain, giving them the tools they need to act responsibly and effectively.”

The clause has also been designed to work alongside existing sanctions clauses such as LMA3100A and LMA3200. Additionally, it includes safeguards to ensure that re/insureds are not penalised for non-compliance due to circumstances beyond their control.

As the clause is a new tool for the market, it is complemented with a guidance note and FAQs.

This website states: The content on this site is sourced from the internet. If there is any infringement, please contact us and we will handle it promptly.