NU Online News Service, May 6, 3:21 p.m.EDT

Insurers need to step up their compliance knowledge of sanctionsif they want to avoid a fate similar to HHC Insurance Holdings,which paid a fine of over $38,000 for insuring aircraft used inIran.

According to attorneys Michael Kurtis and Sue Stead with the lawfirm Nelson Levine de Luca & Horst, the recent fine of $38,448to settle allegations of violations of the Iranian TransactionsRegulations points to a rise in concern over sanction regulationsthat are growing as turmoil grips the Middle East and NorthAfrica.

In an issues bulletin, the attorneys say insurers andreinsurers that could be in a position to transact business withIran or other nations on the sanctions list "must enact internalprotocols to ensure compliance" as regulations established by theOffice of Foreign Asset Control (OFAC) become more complex. Theyadd that an organization-wide process to screen insurance andreinsurance programs for potential violation of sanctions needs tobe implemented.

Kurtis and Stead say a recent enforcement briefing released byOFAC outlines that the fine settles allegations that HCC InsuranceHoldings Inc., a Houston, Texas-based insurance holding group,violated the International Emergency Economic Powers Act when itparticipated in the hull portion of an aircraft hull and liabilityinsurance placement by a foreign broker. The policy insured aforeign-owned commercial airline that leased aircraft to anair-charter company that operated in Iran.

The policy was in effect from April 2005 to April 2006, and HCCvoluntarily reported the violation.

OFAC says the base penalty for the violation was $56,960, established underthe sanction guidelines, for a premium of $113,921 that HCCreceived.

The reduced fine reflects "General Factors" among which was thefact the company had never violated OFAC regulations and was neversubject to action or penalty. OFAC also notes the company'scooperation in the investigation as a factor in reducing thefine.

"HCC did not renew its participation in the policy and no longerprovides insurance coverage for the air-charter company thatoperated in Iran," OFAC says. However, the regulator says thecompany either did know or should have known it was in violation ofthe law.

In a statement HCC says of the incident, "As noted in the OFACposting, this matter dates back to 2005, and we have since thenstrengthened our export control compliance program and are pleasedto have resolved this matter on favorable terms."