Strengthening sanctions compliance: What the LMA’s new clause means for reinsurers

In a move that underscores the growing global emphasis on sanctions enforcement, the Lloyd’s Market Association (LMA) has released a new model clause aimed at bolstering sanctions compliance in reinsurance contracts. For compliance professionals and insurers alike, this development is more than just a legal update—it’s a signal that regulations are being tightened, and the cost of non-compliance is rising. 

At Veriphy, we understand that staying ahead of these changes isn’t just about ticking boxes—it’s about protecting your business, your reputation, and your clients. Let’s take a closer look at the changes and why they’re so important for reinsurers.  

What’s changing?  

The LMA’s new clause is designed to give reinsurers clearer contractual rights to terminate or avoid obligations if fulfilling them would breach sanctions laws. This is particularly relevant in today’s geopolitical climate, where sanctions regimes are expanding rapidly and firms are having to navigate tighter restrictions and emerging risks. 

For insurers and brokers, this means: 

• Greater contractual clarity in reinsurance agreements 

• Increased pressure to ensure all parties in the chain—from cedants to reinsurers—are fully compliant 

• More scrutiny of counterparties, clients, and jurisdictions involved in any transaction is needed 

Why it matters  

Sanctions breaches can lead to severe penalties, reputational damage, and even criminal liability. The LMA’s clause is a proactive step, but it also places a greater onus on firms to demonstrate robust due diligence and ongoing monitoring. 

But with traditional compliance processes typically cumbersome, long-winded, and prone to human error, modern-day insurers need something much more efficient and effective—particularly if they’re working with large client bases. This is where automated compliance solutions can help. 

Reinsurers should look to invest in real-time, reliable tools for: 

• Sanctions screening: Instantly check individuals and entities against global sanctions lists. 

• PEP and adverse media checks: Identify politically exposed persons and reputational risks. 

• Ongoing monitoring: Stay alert to changes in client risk profiles with automated alerts. 

Choosing a provider that can integrate seamlessly into your existing compliance workflow should also be treated as a priority—helping you meet regulatory expectations without slowing down your business.  

The LMA’s clause is a reminder that compliance isn’t static—it exists and changes with the world around us. As regulators and markets respond to geopolitical shifts, your compliance tools need to be agile, accurate, and always up to date. 

Need support getting your head round the legislation? Our online sanctions training can help you and your team brush up on your knowledge so you can navigate complex and quickly changing legal requirements. Get in touch today to find out more.