Given the US and Cuba are restarting their diplomatic relationship, the sanctions that have been in place for over 50 years are anticipated to be softened and finally extinguished completely.  Whilst regular trade to/from Cuba has been complicated and rare until now, this is set to change and quickly – so how does is your insurance affected?

Cargo Insurance

Cargo insurances often (but not always) exclude trade from or to embargoed countries including Cuba, regardless of whether that specific cargo is or might be in breach of the sanctions in place.  If you cargo policy still has an exclusion for Cuban trade, the policy itself will not insure your cargo being carried to/from Cuba regardless of whether that trade is in breach of sanctions.

We expect cargo insurers to remove that exclusion in time, but only after the US Congress has passed laws to repeal the sanctions – until that time, any insurer with a US interest (which can be shareholders, treaty reinsurers with a US interest, US employees, officers or Directors amongst other things) is unlikely to affirm cover for Cuban trade.

At the same time, almost all policies placed in to international markets contain a Sanctions Limitation Exclusion Clause which states that, in the event the insurer or reinsurer could or will be in breach of any sanctions by paying a claim, they are not obliged to pay.  That’s becoming a grey area where the trade itself is not in breach of sanctions and there is no specific Cuba trade exclusion.

Assureds should keep in mind, where the cargo insurance has a ‘no fault’ cancellation provision that insurers can invoke that right at any time., particularly if they are being asked to affirm cover for trade that they consider is in breach of sanctions.  That, in itself, can create issues where cover is being replaced – there have been cases where non-disclosure of a prior mid-term cancellation to future insurers could lead to cover being void in whole or in part.  The point being that Assureds should try to avoid a cancellation where possible.

The real question Assureds should be looking at is whether their current policy excludes trade to Cuba – if it doesn’t and the trade is not in breach of sanctions there may be no need to specifically advise insurers.

Cuba Sanctions – The Future

The US has started the process of normalizing relations (their words!) with Cuba, although news report suggest it will take some time to fully repeal the sanctions that are currently in place.  It does not appear that insurers have a right to soften their position on Cuban sanctions until either the sanctions are repealed or the State Department takes other action to allow that change.

That said, once this does happen, given the insurance market’s keen desire to seek new opportunities in growing economies, we would expect there to be swift embrace of hitherto sanctioned risks.

If you need any specific advice on your trade or the effect of sanctions on your insurance policy, please don’t hesitate to contact us on [email protected].

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