Many people have theories about why the Terrorism Risk Insurance Program Reauthorization Act got derailed shortly before Christmas when the Senate left town without acting. 

My favorite is that President Obama wanted the decks cleared before his announcement, on Dec. 17 that the United States would reestablish diplomatic relations with Cuba. The move would ease restrictions on travel and funds transfers, support expanded trade and allow more financial transactions between the United States and Cuba.

In somewhat record speed—a month later—the U.S. Office of Foreign Assets Control (OFAC) amended the Cuban Assets Control Regulations, and those regulations now are in effect. The new regulations offer a glimmer of hope for some specific industries, including insurance. But for now that hope is restricted to very narrow contexts, such as Cuba-related travel for insurance. And as compliance officials around the country have been explaining to their prematurely elated business teams, no one should be celebrating large new premium opportunities just yet.

A little history is important to note here. Since the early 1960s, the United States has imposed comprehensive economic sanctions against Cuba that severely restrict interaction between the two nations and its citizens.

As a practical matter, these broadly defined and interpreted provisions have for more than 50 years essentially prohibited you from furnishing any Cuba-related, insurance-related service absent applying for a specific license and receiving advance approval from OFAC. This included a bar on U.S. insurers and intermediaries (and their foreign branches and subsidiaries) on insuring any Cuba-related activities even for people or businesses that were neither American nor Cuban. For example, a U.S. insurer or broker could not provide insurance for a Panamanian vessel owned by a Norwegian company transporting British goods to Cuba.

OFAC historically recommended that insurance policies, especially those of a more global nature, contain exclusion clauses dealing with anything inconsistent with the U.S. sanctions. In practice, it was difficult to put such exclusions in place, and your clients often did not find them workable. Your foreign competitors also are not subject to these restrictions and thus can frequently offer more comprehensive services.

The newly amended regulations modify the overall travel regime, liberalize Cuba-related business opportunities in specified areas like telecom services and the sale of technology devices, and dramatically revise the travel-related insurance business restrictions imposed on U.S. brokers and carriers. The amendments establish two general licenses allowing insurers to provide certain travel-related insurance services as long as they meet the terms and conditions of the general licenses, which creates some unanticipated risks.

First, OFAC expanded non-tourism-related activities that qualify for travel by U.S. residents to Cuba without a specific license. These include religious and educational opportunities, market research, exchange of information and informational materials, contractors or grantees working for the U.S. government or a foreign government, journalism, professional research or meetings, and public performances. If the purpose of your trip falls within one of these categories, you need no special permission from the government to travel to Cuba.

Second, OFAC now allows someone in the United States “to issue or provide coverage for global health, life, or travel insurance policies for individuals ordinarily resident in a country outside of Cuba who travel to or within Cuba.” OFAC also made clear this new general insurance authority extends to U.S. policyholders who are “authorized travelers” to Cuba under American law. These people are authorized to service these travel-related policies and pay claims.

However, this applies only to issuing or providing “coverage” for global health, life, or travel insurance policies; servicing those policies; and paying claims for events involving Cuba. It’s not clear that underwriting, related actuarial services or brokering the placement of insurance would be within the scope of the new authorizations. Logic, often absent from U.S. sanctions programs, would suggest so.
It’s also unclear what OFAC is referring to as “global insurance” (although that appears to be an issue only for non-American travelers), and there is no express reference made to reinsurance or retrocessional services. Finally, there is no clear guidance on how to actually authorize travel for anyone in the United States.

Nevertheless, other types of insurance, including property-casualty, shipping, marine and export-import credit insurance, are not within the scope of the general license (not yet anyway), and it does not appear that insurance can be provided under the expanded general authority for the now broader list of permissible Cuba-related business activities, like those approved for telecom, without obtaining an explicit license from OFAC.

Cubans themselves also do not qualify as authorized beneficiaries of U.S. insurance services. The core prohibition restricting American carriers from engaging in transactions in which a Cuban has an interest remains intact for now and lurks just outside the boundaries of the new general licenses.

President Obama has promised broader relief and more normalized relations. But the existing tug-of-war with Congress over who has the authority to lift sanctions could delay, if not dash, his intention to end the longest-standing, shortest-reach embargo in modern American history.

Maybe that TRIA reauthorization theory isn’t so far-fetched after all.