Heath Lambert Ltd., the British insurance broker acquired in 2011 by Arthur J. Gallagher, is holding reinsurance payments the cedent refuses to accept out of fear of violating European Union sanctions imposed on Iran.
In a filing with the Securities & Exchange Commission, AJG says Heath Lambert is holding $14,343.75 it received from Bimeh Iran Insurance Co. under a reinsurance policy it placed on behalf of a U.K. carrier for a marine hull reinsurance contract back in 1998 for a loss that occurred in the same year.
While winding down legacy issues a month after AJG acquired Heath, the firm submitted a claim for payment on the reinsurance contract. A year later, Bimeh paid the claim. In 2012, the same year as the claim payment, the U.S. and EU imposed sanctions on Bimeh and Kish Protection and Indemnity Club for providing coverage to Iran’s petroleum shipper.
Just last month, Heath offered to send the funds to the cedent insurer, but the carrier refused to accept the funds because of Bimeh’s involvement.
AJG says it does not believe the placement of the policy, the submission of the claim, or receiving the funds violates U.S. laws or regulations. The broker adds it has not financially benefited from the payment. Heath will hold onto the money until it can remit the funds to the cedent.
In a statement, AJG says it is “a small technical violation” in connection with the 1998 policy that has been handled by its legal department. The disclosure in its SEC filing is all it intends to say on the matter.
This is not the first time a broker has had to hold onto a claim payment because of sanctions on Iran. Earlier this year, Aon said it is withholding $600,000 of reinsurance payments on an aviation loss to two Iran-based insurers because of U.S. sanctions against the government of Iran.
Sanctions cost HCC Insurance Group $38,000 after the company discovered it had taken a portion of an aircraft hull and liability placement by a foreign broker. The policy insured a foreign-owned commercial airline that leased aircraft to an air-charter company that operated in Iran.
Under the law, if a public company has any dealings with Iran it must report the incident in its public filings.