NY Regulator Targets Lloyd’s for Possible Dealings with Iran

Lloyd's and IranNew York's top financial regulator is intensifying its probe of Lloyd's of London over insurance policies that might have broken U.S. laws against dealings with Iran, according to people familiar with the matter.

Source: Source: WSJ | Published on August 29, 2013

Lloyds and hard market

Benjamin Lawsky, superintendent of New York's Department of Financial Services, on Tuesday sent a letter to Lloyd's asking for details about the firm's internal investigation of possible violations of U.S. sanctions.

The U.K. firm on July 30 disclosed to Mr. Lawsky's office that it has contracts with two firms believed to have shipped alumina to Iran, said the people familiar with the matter.

Lloyd's also confirmed to Mr. Lawsky's office this week that the insurance firm had launched an internal investigation over possible violations of Iran sanctions after a U.K. press report on Sunday, the people added. That report, published in the Sunday Telegraph, said Lloyd's launched the internal probe of some of its managers who might have underwritten policies for shipments to Iran that violate U.S. sanctions.

Tuesday's letter asks Lloyd's for detailed information on its internal probe, including the number and names of managers under investigation.

A Lloyd's spokeswoman said, "Reviewing all aspects of Managing Agents' performance is part of the day-to-day role of overseeing the Lloyd's market. This includes conforming with all applicable international sanctions, which we have always done."

She added that Lloyd's is made up of more than 50 independent businesses that are responsible for the policies they underwrite. The firm provides regular guidance to those businesses on sanctions law and each business is required to have its own compliance officer responsible for ensuring it follows international sanctions rules, she said.

Lloyd's internal investigation comes after Mr. Lawsky in June sent letters to 20 non-U.S. reinsurance companies detailed information on their dealings with entities or people connected to Iran, according to a copy of the letter reviewed by The Wall Street Journal.

He sent another letter in July to 20 additional firms. His office received more than 120 responses, including multiple responses from some firms, said people familiar with the matter.

Mr. Lawsky's yearlong investigation is narrowing its focus in part to policies for shipments of alumina to Iran by trading firms Glencore Xstrata PLC and Trafigura Beheer BV.

Lloyd's confirmed it has contracts with those companies in its July 30 correspondence with Mr. Lawsky but didn't provide more detailed information on its dealings, said the people.

A Glencore spokesman said the company complies with laws and regulations regarding sanctions, and is monitoring all legal developments. A Trafigura spokeswoman said the company is "compliant with national and international law where applicable."

The investigation by Mr. Lawsky's office comes as a new law signed by President Barack Obama in January expanded sanctions that ban any financial firm that does business in the U.S.-including reinsurers-from providing services to companies that trade with Iran.

The law was designed to cripple Iran's energy, shipping and shipbuilding sectors, which could contribute to the country's nuclear-proliferation activities. The shipping industry relies heavily on insurance and reinsurance companies to reduce the risk of a major loss of ships and cargo.

Mr. Lawsky's department regulates banks and insurance companies that do business in New York and are licensed by the department. He has the power to rescind a license from an institution the department finds is in violation of the law.