Subject: Trade that may expose Assureds, Underwriters or Managers to Sanctions against Iran-Circular to Assureds (no )

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1 Subject: Trade that may expose Assureds, Underwriters or Managers to Sanctions against Iran-Circular to Assureds (no ) Background: Following the easing of sanctions by the UN, US and EU earlier this year we are routinely receiving enquiries regarding cover for trade or transactions that may involve Iranian ports, cargoes or Interests. The easing of the sanctions regime has opened up the prospect of a new and significant market to many of our clients but from a practical point of view some complications still exist. In particular, United States Secondary Sanctions which exposes US Corporations or Individuals to sanctions for facilitating trade are still in place; in practice this means that US financial institutions such as banks or insurers cannot become involved in Iranian trade and this would include transacting in USD. Sanctions Checks If you are contemplating trading cargoes to Iran or with an Iranian interest then you must conduct sanctions checks with an approved Sanctions checking programme such as the Thompson Reuters system to ensure that the parties you are contracting with are not subject to sanctions; by way of example this would include the shippers, receivers, agents, stevedores, port authority etc. It is a prerequisite of your insurance cover that all parties involved in the trade must clear sanction checks. Claims payments are also subject to sanction checks therefore it is also important to ensure that any contractor appointed is not subject to sanctions. Amended Cover Terms: Assureds will be aware that it is standard practice for marine insurance policies to contain a sanctions exclusion clause. The effect of such a clause is to exclude any liability or loss in the event that the Underwriter is exposed to Sanctions - see Class I, Clause 4 (K) and Class II, Clause 13 (S). Until further notice our Cover Terms in relation to ports, cargoes or individuals associated with Iranian trade will be amended as follows, the section of text highlighted in yellow shows the substantive change to the current clause: 1) The existing sanctions exclusion clause(s) Class I, Clause 4 (K) and Class II, Clause 13 (S) will be replaced as follows: Amended Sanctions Exclusion Clause There is no Insurance where support, assistance, involvement, payment (whether in respect of any claim, or settlement of disbursements or accounts of any third party), or other benefit to an Assured of whatever nature, may individually or collectively expose the Managers, Underwriters, or any party providing reinsurance to the Underwriters, to Sanctions. 1 / 5

2 and; 2) That in respect of claims payments or payments to surveyors, correspondents, lawyers or others contractors in Iran or to Iranian interests that the Assured shall discharge the claim and/or pay all such invoices in the first instance and submit to the Club a request for reimbursement i.e. the pay to be paid rule will be enforced in full. What does this mean in Practice? If either of the Underwriters, their reinsurers, or the Managers are exposed to sanctions, then there is no insurance. The only new element here is the addition of any reinsurer as a party that would trigger this clause if they are exposed to sanctions. The parties that provide reinsurance to the Club are not US companies therefore there is no material amendment to cover but the change above will allow us to cover Iranian voyages. It is also important to note that ignorance is no defence, therefore if an Assured mistakenly or inadvertently exposes any of the above parties to sanctions, then there is no insurance. Michael Else and Co, on behalf of Underwriter and Reinsurers also need to take a proactive approach to sanction screening so the following policy will apply to all vessels chartered that may call at Iran. If you are conducting your own Sanctions Checks and declare vessels in arrears to the Club ie monthly quarterly or otherwise; 1) You must conduct your own sanctions check in relation to parties, cargoes or trades; 2) Once we receive and review the declaration we will also have to sanction check the voyage and if cleared we will issue an endorsement to the policy which will amend a. the amended sanctions exclusion clause and the pay to be paid amendment; and b. the limits, premiums and deductibles to a currency other than USD i.e. this will be EURO or Sterling for the nominated voyage. There will be no cover for voyages that may expose the Underwriters to sanctions until such time as the Managers have positively vetted a voyage. Clients who are declaring in arrears may wish to submit voyages to or from Iran in advance to the Managers so that they can be vetted rather than wait until the actual declaration the information will be required in any event. If you need Sanctions Guidance from us - Individual Voyages The following steps will apply if you need guidance on Iranian Sanctions: 1) If you declare a vessel that will trade to or from Iran you must be able to provide details on any Iranian company involved in the transaction including but not limited to terminals, port agents or representatives; you must know the identity of the cargo buyer or seller as well; 2) You must provide to us sanction checks from an established sanction system such as 2 / 5

3 Thompson Reuters showing that all parties with whom you are contracting are free of sanctions. If this is not provided then we will charge an administration fee of Euro 100 to run the checks ourselves; 3) If the voyage is approved ie there are no sanctioned parties involved, we will issue an endorsement to the policy which will amend a. the amended sanctions exclusion clause and the pay to be paid amendment; and b. the limits, premiums and deductibles to a currency other than USD i.e. this will be EURO or Sterling for the nominated voyage. 3) We would strongly recommend that you contact us before you commit to a trade or a fixture we will need 24 hours to respond provided we are supplied with all the information we need. Managers Sanction Declaration We have developed a Sanctions declaration list shown as appendix one to this document and if your chartering activity exposes you to Iran we will send this to you electronically so you can complete for voyages. Iranian Owned Vessels Until further notice please note that we are unable to insure vessels owned or operated by Iranian companies. This is because the risk carrier is unable to provide a policy of insurance to, or that benefits, Iranian domiciled companies. In our terms this means that we would be unable to indemnify your counterparty ie the owner in the event of a casualty or loss therefore we cannot provide cover for these vessels. Sanctions Health Warning It is essential that you conduct sanction checks for every trade but in particular with any voyage or transaction with an Iranian interest. We will not be able to indemnify you if the payment is to be made which will benefit a sanctioned party ie to be clear there will be no cover. Iranian Trade and Club Cover Action Required If you intend shipping cargoes to or from Iran, you should alert Gavin Ritchie at the Club in London immediately so the terms of this circular can be built into you existing cover with the Club. In Conclusion With the increased volume in trade to Iran it is important to carry out proper sanctions checks. Under the new Sanctions regimes this is a much easier process and over the coming months there may be an easing of some of the current restrictions in the banking system and also the Insurance market. This circular only deals with specific issues and unique aspects of Iranian sanctions; we ask Assureds to remain vigilant to avoid exposing themselves to sanctions in force with regard to other nations and nationals. 3 / 5

4 Iranian Check List For any voyage involving Iranian Interests we will need the following information in order to sanction check the trade: The Counterparty The Iranian Interest ie the shipper and/or receiver and/or sub-charterer 1. Name: 2. Principal Staff: 3. Address: The Vessel 1. Name: 2. IMO Number: 3. Owners: 4. Class and P&I: 5. Head Charterer (if relevant) 6. Sub-charterer (if relevant) The Cargo and Port 1. The Cargo: 2. The Iranian Port: 3. The Shipper or Receiver: 4. Iranian agents (if you are appointing them): 5. Iranian Stevedores (if you are appointing them): Notes Please note that there are many different sanctions regimes around the world and this information is specific to Iran; Assureds should remain vigilant to avoid exposing themselves to sanctions impacting other countries or individuals. The duty to sanction check rests with the Assured. Even if we confirm that a trade, voyage, cargo is lawful if there is a subsequent exposure to sanctions then there will be no cover provided and the risk rests with the Assured in relation to Iran and generally. 65 Leadenhall Street, London EC3A 2AD charterers@themecogroup.co.uk Tel: / 5

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