Guidance for Maritime Insurance Companies
A maritime insurance company may wish to consider implementing the following diligence practices as appropriate in assessing and mitigating sanctions risks.
Monitoring Automatic Identification System (AIS) transmissions and investigating the following occurrences when involving an insured vessel: any significant time period with non-transmission that is not consistent with the International Convention for the Safety of Life at Sea (SOLAS); navigation of suspicious deviations in routes (e.g., changes without what appears to be a legitimate reason to go off-route, such as unsafe ports, extreme weather, or emergencies); a pattern of turning off AIS in a manner inconsistent with SOLAS; and engaging in trade to or from vessels that are not transmitting AIS consistent with SOLAS.
Including in pre-coverage and claims presentment, due diligence procedures that assess the AIS history of vessels that engage in potentially illegal activities and operate in areas determined to be high-risk areas for sanctions evasion, both of which may be indicators of possible involvement in illicit activity and may warrant further investigation of the ship’s voyage, charter, ownership, and other factors.
Ensuring that insurers that provide coverage for ship owners, suppliers, buyers, charterers, and ship managers could research the AIS history for all the vessels under the ownership or control of such parties. Insurers may wish to consider further communicating to clients that any signs of AIS transponder manipulation inconsistent with SOLAS could be considered a red flag and investigated prior to entering into contracts with, continuing to provide services to, or engaging in other activities with such vessels (including engaging in financial transactions in connection with the vessel’s activities).
Incorporating contractual language and explicitly notifying clients that AIS disablement or manipulation inconsistent with SOLAS is possible grounds for investigation by the insurer of the ship’s activities and could result in cancellation of insurance.
Incorporating a contractual provision that prohibits transfers of cargo to or from clients with other vessels that are not broadcasting AIS consistent with SOLAS or have a history of AIS transponder manipulation inconsistent with SOLAS.
Informing legal regulators/competent authorities, other insurers, commercial databases, the International Maritime Organization (IMO), and when relevant, the United Nations (UN) Security Council 1718 Committee Panel of Experts (the UN DPRK Panel of Experts) in the event of insurance denial or cancellation of services of a vessel in relation to illicit activity.
Informing registrants (including owners of vessels) that activity inconsistent with relevant U.S. or UN sanctions may be cause for immediate termination of business and that the underlying due diligence and registration documents revealing information on ownership structure may be sent to the relevant U.S. government and/or UN body at the discretion of the insurer.
Ensuring, as appropriate and allowed by applicable laws and regulations, due diligence documents (e.g., registration documents for flag registries) include a color photocopy of the passports, names, business and residential addresses, phone numbers, email of all individual owners of the vessel(s), and the names and IMO numbers of all the vessels in the fleet of the individual ship owner, for ships operating near areas determined to be high risk for sanctions
evasion or violations. Where necessary, include in forms collecting personally identifiable information (PII) that the insurers and re-insurers may share the PII with competent authorities if the vessel conducts unlawful activities, as allowed by applicable laws and regulations.
Ensuring clear communication with international partners, as shipping business arrangements may involve parties subject to the laws of different jurisdictions. Clearly explaining relevant restrictions under and the steps required to comply with U.S. and UN sanctions regimes and encouraging all parties involved in the shipping industry to share this advisory with others in their supply chain.
Incorporating data such as historical ship location, ship registry information, and ship flagging information, along with available information from the U.S. Department of the Treasury, the UN, and the U.S. Coast Guard into due diligence practices.