The Lloyd’s Market Association has today published two sanctions suspension clauses.

The release of LMA3100A and LMA3200 are the result of a 12-month consultation across the insurance industry and specialist sanctions lawyers, as well as with regulators OFAC and HMT, and the French Insurance Association.

Originally introduced in 2010 to respond to the Iranian sanctions, the LMA3100 clause has seen extensive adoption by insurers and reinsurers internationally for over 13 years. 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.

At the same time, 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. It operates in the same way as LMA3100 and LMA3100A, but should be easier to enforce in a French Court. It is more narrative and does not need to meet strict French requirements for the drafting of an effective exclusion clause.

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

The association advises that LMA3200 be considered an alternative to LMA3100A on international contracts which are not subject to English or US law.

The LMA also received feedback regarding the need to consider sanctions from other jurisdictions, such as Australia, and has added model language in the guidance note accompanying the publication of the clauses to facilitate modification of the clauses to incorporate other jurisdictions.

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