The result of the consultation is the release of LMA3100A and LMA3200 to provide enhanced choice for underwriters across both common and civil law jurisdictions.
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.
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. 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.
LMA3200 should be considered an alternative to LMA3100A on international contracts which are not subject to English or US law. As with all LMA clauses, these are models available for the market to use as drafted or to adapt to their own purposes.
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.
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.”
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