Travel Insurance Companies Hit with OFAC Enforcement Actions
The Treasury Department’s Office of Foreign Asset Control (“OFAC”) continues to rack up settlements. Two travel insurance companies recently settled OFAC enforcement actions for violations of the Cuban Embargo.
Allianz Global Risks
Allianz Global Risks US Insurance Company (“AGR US”) is the US subsidiary of the German financial company. AGR US operates AGR Canada as a branch office in Toronto, Canada. AGR US agreed to pay $170,535 for 6,474 violations of the Cuban Assets Control Regulations.
Between August 20, 2010 and January 15, 2015, AGR Canada provided travel insurance policies that included coverage for Canadian residents’ travel to Cuba. AGR Canada provided two types of travel insurance: (1) insurance coverage for a trip that would be effective 30 days; and (2) insurance coverage for a full year for multiple trips, including Cuba. The travel insurance covered medical expenses for emergency care and non-refundable expenses resulting from trip cancellation or delay.
AGR Canada failed to collect destination information as part of the insurance policy issuance process. AGR Canada only learned about the specific destinations when a claim was submitted. Interestingly, AGR Canada learned on at least one occasion during the time period that AGR Canada was issuing insurance to cover Cuba.
ACE Limited was a Swiss company that merged with Chubb Limited. Prior to the merger, ACE had a holding company that was incorporated in the US, which had a Europe subsidiary, ACE Europe domiciled in the UK. ACE Europe agreed to pay $66,212 to settle 20,291 violations of the Cuban Assets Control Regulations (“Cuban Sanctions”).
Between January 2010 and December 31, 2014, ACE Europe provided Cuba-related travel insurance consisting of premium payments and claims payments. The violations occurred because of ACE’s misunderstanding of the applicability of U.S. sanctions on Cuba with respect to this business activity.
ACE sold insurance to individual travelers and group travel policies. The coverages insured travel-related risks, including baggage or property, death benefits, medical expenses and trip cancellation or delay. ACE sold policies through direct sales or through a third party.
In 2012, ACE Europe issued group travel policies to a European online travel agency through master agreements. The third party sold the policies at a pre-determined premium for each individual covered. The travel agency also offered separate travel insurance products for flight and hotel cancellation, and sometimes included medical expenses or lost baggage.
ACE’s global insurance policies did not exclude travel to sanctioned locations. Ace explained that the failure to include sanctions exclusionary clauses was the result of a misunderstanding of whether U.S. sanctions on Cuba applied to its activity. Because of the U.S. holding company structure, the U.S. sanctions applied to the ACE subsidiary in Europe.
In March 2012, ACE Europe’s ranch in Spain sought guidance from its regional compliance team for Europe as to the applicability of Cuban sanctions. In response, the ACE Europe regional compliance team advised ACE Europe in Spain that travel by European customers was permissible because it was subject to the EU’s anti-blocking regulation.
Notwithstanding these enforcement actions, in January 2015, OFAC amended its Cuba Sanctions regulations by authorizing certain insurance activities.