A New York regulatory investigation of Lloyd’s of London for possible violations of Iran sanctions law has led to a government request for files of an internal probe by the insurer, a person familiar with the matter said.
Lloyd’s, along with Swiss Reinsurance Co., were among several companies reported July 1 to be the subject of the inquiry by New York’s Department of Financial Services, or DFS. Superintendent Benjamin Lawsky asked the insurers about their procedures to avoid violations of the Iran Freedom and Counter-Proliferation Act of 2012, according to a letter from the department.
Lawsky has now asked for details on a Lloyd’s probe, which was triggered by his initial request for information, said the person, who asked not to be identified because the matter isn’t public. Lloyd’s disclosed to Lawsky’s office July 30 that it has contracts with two firms, Glencore Xstrata Plc and Trafigura Beheer BV, that were linked to alleged shipments of aluminum to Iran, the person said.
“Reviewing all aspects of managing agents’ performance is part of the day-to-day role of overseeing the Lloyd’s market,” Matt Drage, a Lloyd’s spokesman, said in a statement. “This includes conforming with all applicable international sanctions, which we have always done.”
The DFS said in the June 25 letter that 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. The policy and the resulting claim payment “would likely violate the IFCPA,” the DFS said, referring to the act.
Ron Klug, a DFS spokesman, declined to comment on the probe.
“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 when the probe was first reported. “Any suggestion that Swiss Re is in violation of trade sanction laws against Iran is without merit.”
In the June letter to the insurance companies, the DFS said it is seeking information about insurers’ plans for compliance and due diligence to avoid violations of the law.
The regulator asked the companies for a copy of every policy issued to Glencore 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.
Besides Lloyd’s and Swiss Re, companies contacted by the DFS include Hannover Re Ltd., XL Insurance Ltd. and Assured Guaranty Re Ltd. Assured said it wasn’t contacted by the regulator. Representatives for the other companies couldn’t be reached for comment.