Published: Monday, 16 May 2022
Do you work, or have you ever worked, for clients with connections to Russia, Belarus, or Ukraine?
As the war in Ukraine continues, Insurers are asking for more information at renewal.
What effect will sanctions have on my PI renewal?
Commercial insurance policies have carried general sanctions conditions for years, as Insurers cannot support business with sanctioned individuals, regimes or countries and they exclude cover for any such work.
If you have had any dealings with clients connected to Russia, Ukraine or Belarus, your Professional Indemnity Insurers will want to know the details.
Some Insurers have already started issuing questionnaires asking whether you:
- carry out sanctions checks on all clients,
- have reviewed and updated your sanctions procedures,
- derive income from any work in Russia, Belarus or Ukraine (or have in the past),
- deal with any Russian oligarchs in the UK (or elsewhere),
- generate any income from property acquisitions by any offshore entity that has connections with Russia, Belarus or Ukraine,
- have any clients who are passport holders of Russia, Belarus or Ukraine, or who are ‘politically exposed’ persons.
Where (a) you have exposure, or (b) where you have done business with sanctioned persons or entities, the Sanctions Exclusion clause will apply, and the policy will not provide cover for claims arising from professional services rendered.
The position is slightly more complicated where you have clients with connections to Russia, Belarus or Ukraine, but where no sanctions currently apply. In the present fast moving climate, sanctions can be applied swiftly without notice, making it important that your sanctions procedures are fit for purpose to avoid criminal penalty.
For accountants, we have already seen some Insurers apply exclusion clauses that limit the scope of cover to less than the Institute minimum policy wording.
Where this is the case, it may be worth considering whether the engagement should continue. Accepting modified exclusion wordings that limit cover to less than the Institute minimum terms, means the firm will need to apply to the institute for a PII dispensation involving time for you and your broker (who needs to undertake a market wide investigation to see if other Insurers might provide cover).
This is a general overview and Insurers' responses will depend on your unique circumstances. However, we recommend that all firms affected:
- Review sanctions checking procedures.
- Assess any exposure you may have from your current and past clients.
- Where you have done business with affected clients, consider whether it is appropriate to continue.
- Speak to your Ntegrity contact to discuss any concerns you may have.
Managing Director, Ntegrity