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AIDA – FERMA Conference 2013 - Presentations

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AIDA-Europe and Ferma invite you to come to Paris on June 3rd and participate in the one day conference on questions of Commercial Insurance Law which they jointly organise. As we all know Risk and …

AIDA-Europe and Ferma invite you to come to Paris on June 3rd and participate in the one day conference on questions of Commercial Insurance Law which they jointly organise. As we all know Risk and Insurance Managers are permanently confronted with a wide scope of legal questions. We also know that legal experts can profit from looking at what happens in practical business life. This is why we want to bring together the members of Ferma and AIDA-Europe under the motto “when theory meets practice”. In four panels risk managers, academics, lawyers and other legal experts will cover important legal aspects of the following topics:
- Co-Insurance: Who owes what, when and to whom?
- Embargo Regulation: The discordant music of European and national public orders
- Serial Claims: When fiction trumps reality
- D&O Insurance: Phantasms on forbidden guarantees

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  • 1. INTRODUCTION  Colin  Croly  –  AIDA  Europe  Chairman  Jorge  Luzzi  –  FERMA  President    
  • 2. CO-­‐INSURANCE  
  • 3. Co-­‐insurance  Theory  and  prac2ce  Prof.  Alberto  Mon2    InsEtute  for  Advanced  Study  IUSS  Pavia  Studio  Legale  MonE  –  Law  Firm  (Milano)    Email:  alberto.mon2@iusspavia.it    European Insurance Law: When Theory Meets PracticeAIDA Europe / FERMA ConferenceParis, 3 June 2013  
  • 4. Co-­‐insurance:  theory  Risk  sharing  (two  or  more  par+es)  •  Between  insurer  and  insured    – Co-­‐insurance  clauses  (reten+on  /  deduc+ble)  •  MulEple  insurers  on  risk  – Co-­‐insurance  v.  reinsurance                (but  also:  co-­‐reinsurance)  – Co-­‐insurance  v.  co(re)-­‐insurance  pools  
  • 5. Co-insurance: theory (cont’d)Sharing  of  risk  among  insurers  (vis-­‐à-­‐vis  the  insured)  •  Horizontal  – shares  or  quotas  of  the  same  risk  layer  •  Ver2cal  – different  risk  layers  (primary/excess)  
  • 6. Co-­‐insurance  Horizontal  risk  sharing  Insurer  1  40%  Insurer  2  35%  Insurer  3  25%  
  • 7. Co-­‐insurance  Ver+cal  risk  sharing  • Insurer  3  Second  excess  (€15mn  XS  €22.5mn)  • Insurer  2  First  excess  (€12.5mn  XS  €10mn)  • Insurer  1  Primary    (€10mn  limits)  
  • 8. Co-­‐insurance  Ver+cal  and  horizontal  risk  sharing  • Insurer  5  (50%)  +  Insurer  6  (50%)  Second  excess  (€15mn  XS  €22.5mn)  • Insurer  3  (60%)  +  Insurer  4  (40%)  First  excess  (€12.5mn  XS  €10mn)  • Insurer  1  (55%)  +  Insurer  2  (45%)  Primary    (€10mn  limits)  
  • 9. Co-­‐insurance  Historical  perspec+ve  •  “Ancient”  paradigm  – Common  pracEce  in  Europe  in  medieval  Emes  – Insurance  broker  /  Leading  underwriter  – Slip  method  /  Following  market  •  “Modern”  paradigm  – Large  insurance  companies  (from  XVII  cent.)  – Risk  sharing  agreement  among  insurance  companies  (ini+a+ve  of  the  first  insurer)  
  • 10. Co-­‐insurance  Legal  rules  and  defini+ons  European  Union  law  •   Community  co-­‐insurance  First  step  towards  market  liberalizaEon  (1978)  – DirecEve  1978/473  (ArEcle  2)  – DirecEve  2009/138  [Solvency  II]  (ArEcle  190)  •  Large  risks  covered  by  a  single  contract  •  Role  of  leading  insurer  (fixing  terms  and  condiEons  of  coverage  and  premium)    
  • 11. Co-­‐insurance  Legal  rules  and  defini+ons  (cont’d)  NaEonal  laws  (Europe)  •   Lack  of  harmonisa2on  –   Different  legal  regimes  –   Different  market  prac+ces  
  • 12. Co-­‐insurance  Legal  rules  and  defini+ons  (cont’d)  Italian  law  •   Community  co-­‐insurance  – ArEcles  161-­‐162  of  the  Italian  Insurance  Code  •  Single  contract  (same  dura+on  /  global  premium  /  signed  by  all  co-­‐insurers)  •  Leadership  clause  for  the  management  of  the  contract  according  to  express  terms  and  market  pracEces  •  Leading  insurer  fixes  terms  and  condiEons  of  coverage  and  premium  for  all  parEcipaEng  insurers  
  • 13. Co-­‐insurance  Legal  rules  and  defini+ons  (cont’d)  Italian  law  •   Indirect  co-­‐insurance  – ArEcle  1910  of  the  Italian  Civil  Code  •  MulEple  independent  contracts  covering  the  same  risk  •  Duty  to  disclose  (at  all  relevant  +mes)  •  Default  rule:  each  insurer  is  liable  for  the  full  extent  of  its  contract  (limit  Indemnity  principle)  /  Right  of  contribuEon  •  The  rule  can  be  derogated  by  contract  (propor+onal  liability  /  excess  coverage)  
  • 14. Co-­‐insurance  Legal  rules  and  defini+ons  (cont’d)  Italian  law  •   Direct  co-­‐insurance  – ArEcle  1911  of  the  Italian  Civil  Code  •  Focus  on  horizontal  risk  sharing  •  Default  rule:  each  co-­‐insurer  liable  for  its  own  share  only  (even  if  a  single  contract  is  signed  by  all)  •  Case  law:  leadership  agreement  (“clausola  di  delega”)  does  not  change  the  default  rule  
  • 15. Co-­‐insurance  Issues  of  prac+cal  relevance  (Italian  law)  Powers  of  leading  insurer  depend  on  the  leadership  clause  (“clausola  di  delega”):  •  Authority  to  bind  co-­‐insurers  at  the  Eme  of  conclusion  of  the  contract  –  requirements  (and  effects  of  lack  thereof)  •  Receipt  of  premium  payment,  noEces  and  communicaEons  •  Coverage  determinaEons  and  indemnity  payment  (limits:  good  faith  /  but  also:  claims  control  /  claim  coopera+on  clauses)  
  • 16. Co-­‐insurance  Issues  of  prac+cal  relevance  (Italian  law,  cont’d)  •  Statute  of  limita2ons:  effects  of  noEce  to  leading  insurer  only  •  Standing  to  sue  of  leading  insurer:  –  acEon  to  recover  premium  (against  policyholder)  –  subrogaEon  acEon  (against  liable  third  par+es)  –  rescission  acEon  (misrepresenta+on  /  failure  to  disclose)  •  Standing  to  be  sued  of  leading  insurer:  effects  of  lawsuit  insEtuted  against  leading  insurer  only  •  Wording  of  leadership  clause  is  KEY  
  • 17. THANK  YOU!  alberto.mon2@iusspavia.it  Prof.  Alberto  Mon2    Ins2tute  for  Advanced  Study    «IUSS  Pavia»    Studio  Legale  Mon2  –  Law  Firm  (Milano)    Email:  alberto.mon2@iusspavia.it  
  • 18.      AIDA-­‐EUROPE  –  FERMA    Paris,  3  June  2013        COINSURANCE  /  GROUPS  OF  INSURERS:  WHO  OWES  WHAT,  WHEN  AND  TO  WHOM?          Alexis  Valençon  Partner,  BOPS              
  • 19. Coinsurance/groups  of  insurers:    Who  owes  what,  when  and  to  whom?  0.  Introduc2on:  Defining  coinsurance    1.  Issues  rela2ng  to  the  cashflows  from  the  insured  to  the  co-­‐insurers        2.  Issues  rela2ng  to  the  cashflows  from  the  co-­‐insurers  to  the  insured  3.  Issues  rela2ng  to  the  cashflows  between  co-­‐insurers  
  • 20. INTRODUCTION:  DEFINING  COINSURANCE      •  DefiniEon  of  community  coinsurance  by  Solvency  II  (art.  190).    •  The  French  Insurance  Code  does  not  offer  a  definiEon  of  coinsurance.    •  Coinsurance  may  include  programmes  consEtuted  of  several  insurance  layers   according   to   the   Cour   de   cassa+on   (1st   civ.   div.,   28   Nov.   1995,  Nos.93-­‐12.904  &  93-­‐11.003).    •  DisEnguishing  “horizontal”  and  “verEcal”  coinsurance.  
  • 21.                  I.  ISSUES  RELATING  TO  THE  CASHFLOWS  FROM  THE  INSURED    TO  THE  CO-­‐INSURERS  (slide  1)                                A.  “Horizontal”  coinsurance        •  QuesEon:  What  happens  if  the  insured  pays  only  part  of  the  premium?  •  Answer:  Coinsurers  may  suspend  the  whole  cover    (Cour  de  cassa+on,  1st  civ.  div.,  26  April  1984,  No.83-­‐12.460).    
  • 22.                    I.  ISSUES  RELATING  TO  THE  CASHFLOWS  FROM  THE    INSURED  TO  THE  CO-­‐INSURERS  (slide  2)                          B.  “VerEcal”  coinsurance      •  QuesEon:  What  happens  if  the  insured  pays  only  part  of  the  premium  (i.e.  does  not  pay  the  premiums  corresponding  to  all  the  layers)  ?      •  Answer:  A  parEal  cover  is  in  principle  possible,  as  the  layers  are  independent  (primary  vs.  excess).          
  • 23.                II.  ISSUES  RELATING  TO  THE  CASHFLOWS  FROM  THE  CO-­‐  INSURERS  TO  THE  INSURED  (slide  1)            A.  “Horizontal”  coinsurance      •  QuesEon   1:   Are   the   coinsurers   jointly   and   severally  liable?  •  Answer:  ArEcle  1202  of  the  French  Civil  Code:  “Joint  and  several   liability   may   not   be   presumed:   it   must   be  expressly  sEpulated”.    •  NB:   In   pracEce,   coinsurers   rely   on   clauses   expressly  excluding  joint  and  several  liability  (Cour  de  cassa+on,  1st  civ.  div.,  12  May  2011,  Nos.10-­‐18.399  &  10-­‐18.541).  
  • 24.    A.  “Horizontal”  coinsurance      •  QuesEon  2:  What  happens  in  the  absence  of  a  clause  expressly  excluding  joint  and  several  liability?  •  Answer:   The   joint   and   several   liability   of   the   leading   insurer  may  depend  on  the  power  it  is  given  by  the  other  co-­‐insurers  (Cour  de  cassa+on,  2nd  civ.  div.,  18  Jan.  2006,  No.04-­‐15.907).                II.  ISSUES  RELATING  TO  THE  CASHFLOWS  FROM  THE  CO-­‐  INSURERS  TO  THE  INSURED  (slide  2)  
  • 25.    B.  “VerEcal”  coinsurance      •  QuesEon:  What  deducEble  should  the  excess  layer  apply  when   a   loss   occurs   and   the   primary   layer   has   been  exhausted?  •  Answer:  2  opEons:  »  “Step  down”  /  “drop  down”.  »  The   primary   layer’s   limit   of   coverage   acts   as   the  excess  layer’s  deducEble.        II. ISSUES RELATING TO THE CASHFLOWS FROM THE CO-INSURERS TO THE INSURED (slide 3)
  • 26.            A.  “Horizontal”  coinsurance      •  QuesEon  1:  When,  in  the  lifespan  of  the  coinsurance,  can  the  leading  insurer  be  liable  to  the  other  co-­‐insurers?  •  Answer:  During  the  whole  lifespan  of  the  coinsurance:  »  The  coinsurance’s  birth:  assessing  the  risk.  »  The   coinsurance’s   life:   assessing   the   loss   /   defending   the  coinsurance  against  the  insured.  »  The   coinsurance’s   death:   terminaEng   the   co-­‐insurance  contract.      III. ISSUES RELATING TO THE CASHFLOWS BETWEENCO-INSURERS (slide 1)
  • 27.            A.  “Horizontal”  coinsurance      •  QuesEon  2:  What  recourses  are  available  to  the  leading  insurer  against  the  other  co-­‐insurers,  in  case  of  joint  and  several  liability?  •  Answer:  ArEcle  1214  of  the  French  Civil  Code.  •  NB:  May  be  difficult  in  pracEce  (Cour  de  cassa+on,  1st  civ.  div.,  7  July  1992,  No.90-­‐13.565).          III. ISSUES RELATING TO THE CASHFLOWS BETWEENCO-INSURERS (slide 2)
  • 28.              B.  “VerEcal”  coinsurance      •  Issue:  The  payment  of  the  defence  fees  by  the  primary  layer  when   it   is   obvious   that   it   will   be   exhausted   and   will   not  possibly  benefit  from  a  recourse  against  the  liable  third  party.  •  Possible  soluEon:  Agreement  before  /  arer  the  loss  with  the  excess  layer?              III.  ISSUES  RELATING  TO  THE  CASHFLOWS  BETWEEN    CO-­‐INSURERS  (slide  3)  
  • 29. AIDA-­‐EUROPE  –  FERMA    Paris,  3  June  2013      THANK  YOU  VERY  MUCH  FOR  YOUR  ATTENTION  !            Alexis  Valençon  Partner,  BOPS    47,  rue  Dumont  d’Urville  –  75116  Paris  Tel:  +33.170.37.39.00  –  Fax:  +33.170.37.39.01    
  • 30. View  from  the  day-­‐to-­‐day  insurance  world  •  Main  concerns  Ø Coinsurance  may  not  be  an  obstacle  for  free  compeEEon  Ø SME’s  ,  Public  InsEtuEons  &  (Non)-­‐Listed  MulEnaEonals  Ø Insurance  Block  ExempEon  RegulaEon  Ø Transparency  is  THE  KEYWORD  
  • 31. View  from  the  day-­‐to-­‐day  insurance  world  •  Over-­‐regula2on  of  coinsurance  in  the  insurance  world  Ø Insurance  capacity  Ø InternaEonal  markets  Ø Premium/CondiEons/Service/Efficiency/RaEng/Solvability  Ø Long  Eme  partnership  throughout  the  various  insurance  lines  Ø NegoEaEons  in  a  broker’s  market  
  • 32. View  from  the  day-­‐to-­‐day  insurance  world  •  Over-­‐regula2on  of  coinsurance  in  the  insurance  world  Ø  Insurance  capacity/technical  knowledge  ü Some  pools    have  been  created  to  avoid  lack  of  insurance  capacity  (e.g.  Nuclear,  Terrorism,  Cat  Nat…)  ü Even  without  a  formal  pool,  coinsurance  is  oren  needed  because  of  capacity/technical  knowledge.  The  subscripEon  market  avracts  a  great  diversity  of  insurance  companies.  The  subscripEon  process  allows  non-­‐specialized  insurers  to  provide  capacity  to  cover  a  risk  relying  on  the  leader’s  experEse  in  that  specific  area  of  risk.    ü Disappearance  of  the  block  exempEon  might  lead  to  the  non-­‐insurability  of  some  specific  risks  
  • 33. View  from  the  day-­‐to-­‐day  insurance  world  •  Over-­‐regula2on  of  coinsurance  in  the  insurance  world  Ø Interna2onal  markets  ü InterpretaEon  of  terms  and  condiEons  of  the  insurance  wording  (Napoleon  law  versus  Common  law)  ü Use  of  different  local  languages  in  e.g.  third  party  liability  claims  where  foreign  insurance  companies  use  the  English  language  only  ü Delay  in  claims  handling  due  to  the  non-­‐presence  of  some  insurance  companies  in  the  market  the  claim  occurred  
  • 34. View  from  the  day-­‐to-­‐day  insurance  world  •  Over-­‐regula2on  of  coinsurance  in  the  insurance  world  Ø  Premium/Condi2ons/Service/Efficiency/Ra2ng/Solvability  ü Different  premiums  per  coinsurer  should  not  necessary  cause  problems,  but  can  be  source  of  dispute,  is  less  efficient  ü Lead  insurer  is  fronEng  the  local  policy:  how  will  different  terms  and  condiEons  match  with  reinsurer  of  the  local  policy?  ü Different  terms  and  condiEons  (e.g.  triggers,  exclusions,  extensions...)  might  lead  to  difficult  claims  handling  ü The  pracEce  of  selecEng  a  lead  insurer  is  Eme-­‐efficient,  avoiding  heavy  and  complex  individual  negoEaEon  with  every  possible  coinsurer  ü This  pracEce  is  bringing  legal  certainty  for  the  parEes  when  it  comes  to  handling  of  claims  
  • 35. View  from  the  day-­‐to-­‐day  insurance  world  •  Over-­‐regula2on  of  coinsurance  in  the  insurance  world  Ø  Long  2me  partnership  throughout  the  various  insurance  lines  ü ConEnuity,  Long  term  partnership  with  the  insurer(s)  leads  to  a  bever  spread  of  risk  over  the  years  and  lead  ulEmately  to  more  stable  premiums      ü The  number  of  possible  lead  insurers  with  a  well  funcEoning  network  is  limited  ü In  case  of  series  of  large  claims,  discussions  of  coverage,  …conEnuity  has  always  it’s  added  value  ü Insurance  is  people’s  business,  parEes  who  know  and  trust  each  other.  The  premium  is  not  only  the  price  paid  for  the  terms  and  condiEons,  but  also,  even  mainly  for  the  service  in  case  of  claim.              
  • 36. View  from  the  day-­‐to-­‐day  insurance  world  •  Over-­‐regula2on  of  coinsurance  in  the  insurance  world  Ø Nego2a2ons  in  a  broker’s  market  ü The  first  phase  of  the  subscripEon  process,  the  selecEon  of  the  lead  insurer  is  a  highly  compeEEve  process  where  every  potenEal  insurer  willing  to  become  the  leader  will  be  contacted,usually  by  a  broker  ü A  broker’s  market  is  even  a  bever  guarantee  to  open  compeEEon:  even  if  the  lead  insurer  would  try  to  align  his  quote  to  the  higher  one  of  a  coinsurer,  the  broker  will  give  the  opportunity  to  an  other  leader  to  quote  the  business  ü If  the  leader  quotes  really  to  low,  it  will  jeopardize  the  relaEonship  already  before  the  start  of  the  insurance  cover      
  • 37. View  from  the  day-­‐to-­‐day  insurance  world  •  Conclusion  Ø  Professional  negoEaEon  &  placing  of  an  industrial  insurance            program  is  much  more  complex  than  obtaining  the  cheapest  price  and  the  broadest  condiEons    Ø  One  insurer  covering  100%  of  the  risk  is  certainly  the  most  efficient  way  of  placement,  but  an  open  &  transparent  negoEated  coinsurance  in  a  complex  risk,  is  not  only  a  must  but  also  avracEve  and  compeEEve,  whatever  the  way  it  is  realized.  Ø  It  is  vital  to  preserve  these  capabiliEes  and  ensure  the  EU  compeEEveness  with  other  coinsurance  markets  outside  the  European  Union  Ø  Transparency  is  the  KEYWORD.  If  all  steps  are  taken  in  full  transparency  between  insured,  potenEal  insurer(s)  and  broker(  if  any),  the  existence  of  coinsurance  is  a  non-­‐issue.  
  • 38. View  from  the  day-­‐to-­‐day  insurance  world  •  Disclaimer  Ø This  presentaEon  reflects  my  personal  view  on  the  regulaEon  of  compeEEon  in  the  negoEaEon  and  placement  of  insurance  programs  in  the  EU.  It  does  not  necessary  reflects  the  point  of  view  of  FERMA  Ø It  concerns  my  views  on  some  issues  regarding  the  negoEaEon  and  placement  of  large  complex  insurance  programs  of  a  listed  mulEnaEonal,  based  on  own  experience  as  current  risk  and  insurance  manager,  former  insurance  broker.    Ø SME’s,  Public  &  Financial  InsEtuEons  may  have  other  needs  and  regulaEons  which  do  not  necessary  lead  to  the  same  conclusions          
  • 39. View  from  the  day-­‐to-­‐day  insurance  world  •  Thanks!  •  Ques2ons?    
  • 40.  AIDA  Europe  and  FERMA  would  like  to  thank                  for  its  support    
  • 41. SERIAL  CLAIM    
  • 42. AggregaEon  of  Serial  Claims  •  Treatment  of  many  claims  or  losses  as  one  claim  for  the  purposes  of  the  deducEble,  the  limits  and  noEce  provisions  of  the  insurance  policy  •  The  unifying  factor  depends  on  the  policy  wording;  for  example  –  “series  of  claims  resul+ng  from  a  single  act”    –  “all  occurrences  aLributable  to  one  source”  –  “series  of  events  origina+ng  from  one  cause”  –  “each  and  every  loss  or  series  of  losses  arising  from  one  event”  –  “an  Occurrence…aLributable  directly,  indirectly  or  allegedly  to  the  same  actual  or  alleged  event,  condi+on,  cause,  defect,  hazard  and/or  failure  to  warn  of  such”  
  • 43. AggregaEon:  Event  vs  Cause  AXA  v  Field  [1996]  HL    •  “…an  event  is  something  which  happens  at  a  par+cular  +me,  at  a  par+cular  place,  in  a  par+cular  way”  •  “A  cause  is…something  altogether  less  constricted.  It  can  be  a  con+nuing  state  of  affairs;  it  can  be  the  absence  of  something  happening”  
  • 44. AggregaEon  by  Event  Aioi  Nissay  Dowa  v  Heraldglen  [2013]    •  Stated  limit  and  excess  for  “each  and  every  loss”  •  “each  and  every  loss”  shall  mean  “each  and  every  loss  or  accident  or  occurrence  or  series  thereof  arising  out  of  one  event”  •  On  September  11th,  2001,  two  hi-­‐jacked  aircrar  crashed  into  the  North  and  South  Towers  of  the  World  Trade  Center  •  Was  there  one  loss,  or  two?  
  • 45. Pension  misselling  Lloyds  TSB  v  Lloyds  Bank  Insurance  [2003]  HL        “…series  of  claims  [resulEng]  from  any  single  act  or  omission  (or  a  related  series  of  acts  or  omissions)”    Countrywide  v  Marshall  [2003]      “…one  occurrence  or  occurrences  of  a  series  consequent  upon  or  aLributable  to  one  source  or  original  cause”  
  • 46. Savings  &  Loan  Collapse  American  Centennial  Insurance  v  INSCO  [1996]  •  “…series  of  events  or  occurrences  origina+ng  from  one  cause…”  •  Claims  against  directors  and  auditors  following  collapse  of  S&L  bank    •  What  was  the  “cause”  of  the  claims?    
  • 47. Why  Does  AggregaEon  Maver?  •  Limit  and  deducEble  •  Effect  of  NoEce  “The  Assured  shall  give  to  the  Underwriters  no+ce  in  wri+ng  as  soon  as  prac+cable  of  any  circumstance  of  which  they  shall  become  aware  during  the  period  specified  in  the  Schedule  which  may  give  rise  to  a  loss  or  claim  against  them.  Such  no+ce  having  been  given  any  loss  or  claim  to  which  that  circumstance  has  given  rise  which  is  subsequently  made  aer  the  expira+on  of  the  period  specified  in  the  Schedule  shall  be  deemed  for  the  purpose  of  this  Insurance  to  have  been  made  during  the  subsistence  hereof.”  HLB  Kidsons  v  Lloyd’s  Underwriters  [2008]  CA  Rothschild  v  Collyear  [1999]  •  How  many  and  which  policies  are  on  risk?    
  • 48. Effect  of  Policyholder’s  Insolvency  •  Statutory  transfer  of  insolvent  policyholder’s  rights  against  available  insurance  to  third  party  claimants  Third  Party  (Rights  against  Insurers)  Act  1930  •  “Dash  for  Cash”  The  available  insurance  is  insufficient  to  cover  all  third  party  claims  •  Cox  v  Bankside  Members  Agency  [1995]  CA  Chronological  priority,  or  “first  part  the  post”,  is  the  basic  rule  
  • 49.  AIDA  Europe  and  FERMA  would  like  to  thank                  for  its  support    
  • 50. EMBARGO    
  • 51. RestricEons  on  insurance    within  embargo  measures    on  the  example  of  the  EU  Iran  Embargo  RegulaEon      Prof.  Dr.  Manfred  Wandt    AIDA  –  FERMA  Conference  2013  Paris  –  June  03,  2013  
  • 52.  Overview    •  Which  applicable  laws  provide  for  restricEve  measures?  •  What  is  the  content  of  the  applicable  laws?      •  What  are  the  penalEes  applicable  to  infringements?  •  What  are  the  legal  consequences  of  an  infringement  for  the  contract?    •  Can  contractual  sancEon  clauses  be  helpful?  •  How  to  avoid  infringements  in  daily  business?      
  • 53.  EU  Iran  Embargo  RegulaEon  Special  restricEons  on  insurance  related  to    •  (Military)  goods  and  technology  •  Iranian  crude  oil  or  petroleum  products    •  Iranian  petrochemical  products  •  Iranian  natural  gas  (15  October  2012).  •  “to  provide,  directly  or  indirectly,  …  (re)insurance  related  to  the  import,  purchase  or  transport  of  …  products  of  Iranian  origin  or  that  have  been  imported  from  Iran”      Q  of  interpreta2on:  Does  insurance  mediaEon  is  a  kind  of  indirect  provision  of  insurance?    Does  hull  (re-­‐)insurance  for  means  of  transportaEon  is  prohibited?      
  • 54.  General  restricEon  on  insurance  Art.  35  para.  1  EU  Iran  RegulaEon      Prohibi2on  to  provide  (re-­‐)insurance  and  to  broker  the  provision  of  (re-­‐)insurance  to:    a)  Iran  or  its  Government,  and  its  public  bodies,  corporaEons  and  agencies;  b)  an  Iranian  person,  enEty  or  body  other  than  a  natural  person;  or    c)  a  natural  person  or  a  legal  person,  enEty  or  body  when  ac2ng  on  behalf  or  at  the  direc2on  of  a  legal  person,  enEty  or  body  referred  to  in  a)  or  b).      According  to  the  definiEon  in  Art.  1  lit.  o  (iv),  Iranian  person  also  means  any  legal  person,  enEty  or  body,  inside  or  outside  Iran,  owned  or  controlled  directly  or  indirectly  by  one  or  more  of  the  above  menEoned  persons  or  bodies.      Q  of  interpreta2on:  many  ques2ons!          
  • 55. Scope  of  applicaEon  Art.  49  EU  Iran  RegulaEon  This  RegulaEon  shall  apply:  (a)  within  the  territory  of  the  Union;  (b)  …  (c)  to  any  na2onal  of  a  Member  State  inside  or  outside  the  territory  of  the  Union;  (d)  to  any  legal  person,  enEty  or  body  inside  or  outside  the      territory  of  the  Union,  which  is  incorporated  or    cons2tuted  under  the  law  of  a  Member  State;  (e)  to  any  legal  person,  enEty  or  body  in  respect  of  any  business  done    in  whole  or  in  part  within  the  Union.    Q:  also  employees  of  the  insurer?  Q:  also  the  policyholder  in  the  case  of  insurance  for  the  account  of  an  insured?    
  • 56. PenalEes  applicable  to  infringements  •  Penal2es:  according  to  naEonal  law  of  the  Member  States      (Art.  47;  „shall  be  effecEve,  proporEonate  and  dissuasive“)      •  No  liability  for    –  freezing  of  funds  etc.  carried  out  in  good  faith  on  the  basis  that  such  acEon  is  in  accordance  with  the  RegulaEon  (Art.  42  para.  1)    –  infringement  of  the  RegulaEon  in  innocent  unawareness  of  the  prohibiEon  (Art.  42  par.  2)  –  disclosure  of  informaEon  in  good  faith  under  the  RegulaEon  (Art.  42  para.  3)    
  • 57. Civil  law/conflict  of  laws  issues    DeterminaEon  of  the  applicable  naEonal  law  related  to    •  Effec2veness  of  the  prohibited  legal  transac2on:      law  applicable  to  the  contract  (Rome  I  RegulaEon)    •  Mandatory  rules  (of  public  interest),  Art.  9  Rome  I  RegulaEon:    –  of  the  lex  fori  (including  EU  RegulaEon)  –  of  the  state  of  performance  –  of  the  law  applicable  to  the  contract  (→controversial)        
  • 58. Civil  law  AcEons  within  the  Union    EU  Embargo  Regula2on  is  applicable  as  a  mandatory  rule      Invalidity  of  the  insurance  contract  by  reason  of  infringement  of  law  according  to  the  law  applicable  to  the  contract  (e.g.  sec.  134,  138  of  the  German  Civil  Code).    In  German  law:  Legal  presumpEon  of  total  invalidity  of  the  contract,    sec.  139  German  Civil  Code    
  • 59. Civil  law  AcEons  outside  the  Union    Conflict-­‐of-­‐law  rules  of  third  country  (lex  fori)  decide  on  •  the  law  applicable  to  the  contract,  and  •  the  applicable  mandatory  rules.  Q  of  interpreta2on:    Choice  of  forum-­‐clause  and  choice  of  law-­‐clause  as  circumvenEon  in  the  sense  of  Art.  41  Iran  RegulaEon?  
  • 60. Contractual  sancEon  clause  •  Large  number  of  different  wordings  within  the  market    •  Contractual  risk  exclusion  (for  a  legally  uninsurable  risk)  •  consEtuEve  not  only  declaraEve,  because    the  infringement  of  embargo  provisions  is  excluded  a    priori  
  • 61. Contractual  sancEon  clause    In  general  not  an  unfair  contract  term,  because:    •  jusEfied  interest  of  the  insurer/broker  –  to  avoid  penalEes  and  –  to  avoid  the  total  invalidity  of  the  contract    •  no  unreasonable  burden  on  policyholder    
  • 62. Contractual  sancEon  clause    but  unfair  and  void  if  the  clause  is  extended  to    foreign  law  which  is  in  contradicEon  to  EU-­‐/Member  State  law  (so-­‐called  blocking  statute)    Background:  the  US  have  applied  certain  embargo  provisions  extraterritorially  on  non  ciEzens  of  the  USA.    The  EU  has  responded  thereto  with  the  RegulaEon  EC  No.  2271/96  protecEng  against  the  effects  of  the  extra-­‐territorial  applicaEon  of  legislaEon  adopted  by  a  third  country,  and  acEons  based  thereon  or  resulEng  thereof    
  • 63. Contractual  sancEon  clause      Open  ques2on    whether  a  sancEon  clause  is  unfair/null  and  void  if:  •  it  covers  third  countries  embargo  provisions,  •  which  are  not  banned  by  a  blocking  statute,    •  but  to  which  a  court  of  an  EU  Member  State  would  not  give  effect  due  to  conflict  of  law  rules?  Personal  opinion:  even  than  the  clause  is  fair  and  valid  if  there  is  tranperancy  by  specificaEon  of  concrete  acts  and  provisions  
  • 64.  Caveat  lector:      No  carte  blanche  with  respect  to  terms  and  condiEons  for  a  general  compliance  clause  on  the  basis  of  the  movo  „no  insurance  protecEon  for  infringement  of  law  within  the  territory  covered  by  the  contract“        Many  thanks  for  your  aven2on!          
  • 65. US  SancEons  –  AXA  Framework      1.  US  sanc2ons  applicable  to  US  companies  and  other  companies  with  sufficient  US  nexus  2.  US  sanc2ons  intended  to  punish  non-­‐US  companies  who  conduct  business  with  certain  sanc2oned  par2es  or  ac2vi2es  (especially  regarding  Iran)  3.  US  public  disclosure  requirements  under  sec2on  219  of  ITRA  4.  Sanc2ons  under  the  laws  of  individual  US  states  (eg  California,  Florida,  New  Jersey,  New  York)  
  • 66. 66Sanc2ons  in  Insurance  Roundtable  (SIIR)  Preamble  The  SancEons  Compliance  in  Insurance  Roundtable  (SCIR)  is  a  voluntary  group  of  senior  compliance  professionals  from  insurance,  reinsurance  and  insurance  brokerage  companies  engaged  in  the  business  of  internaEonal  insurance.          Mission  SIIRs  mission  is  to  exchange  views  and  develop  non-­‐binding  guidance  on  best  pracEces  for  complying  with  internaEonal    economic  and  trade  sancEons  applicable  to  internaEonal  insurance.      In  addiEon,  SIIR  seeks  to  engage  in  dialogue  with    regulators  and  other  sancEons  authoriEes  to  ensure  that  internaEonal  sancEons  applicable  to  insurance  are  understood  and  workable.    Any  guidance  developed  by  SIIR  will  be  made  available  to  all  interested  parEes,  including  regulatory  authoriEes.        SIIR  parEcipants  are  commived  to  strict  adherence  to  applicable  compeEEon  laws.  SIIR  parEcipants  are  not  obliged  to  follow    any  guidance  developed  by  SIIR.      MeeEngs  SIIR  meets  at  least  quarterly  by  telephone  or  in  person.    Wriven  agendas  will  be  produced  outlining  topics  to  be  discussed.  ACEAIGAllianzAonMarshMunich ReSCORSwiss ReTrans ReTravelersWillisZurich§  Leading global commercial insurers, reinsurers and brokers have been meeting monthly for almosttwo years to ensure a common approach to sanctions compliance§  Participants:§  Charter:AXAHannover ReINGLloyd’s
  • 67. Iran  Sanc2ons  and  the  Insurance  Industry  –  Symposium  June  2013  Insurance  Industry    6  global  insurers    3  global  brokers  2  global  reinsurers  Lloyd’s  3  P&I  Clubs  IUMI  Sanctions – Government SectorEuropean Commission - External Action ServiceUK HM TreasuryUK Foreign & Commonwealth OfficeUN Panel of Experts on IranUS OFACUS State DepartmentGlobal Insurance ClientsBritish AirwaysGE CapitalMaerskOther StakeholdersOne international law firmInternational Association of Insurance SupervisorsKing’s College London
  • 68.  AIDA  Europe  and  FERMA  would  like  to  thank                  for  its  support    
  • 69. D  &  O    
  • 70. D&O liability insurance:From broad coverage…To forbidden guarantees ?
  • 71. D&O  :  from  broad  coverage  to  forbidden  guarantees?  Mr Jorge ANGELLSenior partner of LC Rodrigo Abogados Law firm,Dr Otto CSURGOChairman & CEO of Pannonia Insurance Company,Mr John CURRANPartner of DLA Piper,Mr Emmanuel SILVESTREVice President LIU: Underwriting Manager D&O/FI.Panel presentation :
  • 72. Summary :Ø  Introduction and brief reminders,Ø  D&O insurance & Civil Law boundaries,Ø  D&O insurance & Penal Law boundaries,Ø  D&O insurance & other possible restrictions,D&O  :  from  broad  coverage  to  forbidden  guarantees?  
  • 73. Introduction and remindersØ  Is Corporate indemnification allowed ?Ø  Is D&O insurance, as such, permitted ?D&O  :  from  broad  coverage  to  forbidden  guarantees?  
  • 74. D&O insurance & Civil Law boundariesØ  D&O wrongful intent :«  objec+ve  »  vs  «  subjec+ve  »  definiEon,  D&O  :  from  broad  coverage  to  forbidden  guarantees?  Ø  Warranty statement :«  known  past  »  vs  «  severability  flexibility»,  Ø  Non-rescindable policy : in  any  case  ?  
  • 75. D&O insurance & Civil Law boundariesØ  Predetermined allocation extension :Applicable  to  anyone  and  to  any  wrongful  act  ?  D&O  :  from  broad  coverage  to  forbidden  guarantees?  Ø  Extended Reporting period:«  temporary  cover  »  vs  «  compulsory  discovery  »  Ø  Punitive damages    
  • 76. D&O insurance & Penal Law boundariesØ  Defence costs reimbursement:Contractual  possible  threat  or  mandatory  provision  ?  D&O  :  from  broad  coverage  to  forbidden  guarantees?  Ø  Bail or penal bonds payment:Legal  and  efficient  coverage  ?  
  • 77. D&O insurance & Penal Law boundariesD&O  :  from  broad  coverage  to  forbidden  guarantees?  Ø  Civil or administrative fines    Pro :  for  a  «  reasonable  »  cover  (as  soon  as  not  considered  as  wrongful  intent)      Cons  :  insurance  cover  prohibited  by  Law  ü  Similar  to  penal  fines  (procedures,  Public  Order  purpose…)    ü  Punishment  of  illegal  behaviour  (vs  damage  indemnificaEon)  ü  Fine  paid  to  the  State  AuthoriEes  (vs  Third  party  suffering  any  damage)  Pending rules and first jurisdiction decisions  
  • 78. D&O insurance & other possible restrictionsD&O  :  from  broad  coverage  to  forbidden  guarantees?  Ø  Government anti-indemnification policies,    Ø  Captive involvement: great  care  to  be  taken,  Ø  Premium level adequacy and conflict ofinterest  
  • 79. D&O liability & Ransom payment statusD&O  :  from  broad  coverage  to  forbidden  guarantees?  Ø  Employers safety duties reminder,    Ø  Terrorism financing (direct/indirect)infringement,    Ø  Piracy : legality of ransom payment,    Ø  Ransom payment to terrorist : pendinguncertainties and issues…    
  • 80. Thanks for yourattentionD&O  :  from  broad  coverage  to  forbidden  guarantees?  Any questions ?
  • 81. CLOSING    
  • 82.  AIDA  Europe  and  FERMA  would  like  to  thank                  for  its  support