Turkey sanction uncertainty creates further headaches for insurers

With the US government considering further restrictions against Turkey, insurers and brokers operating in the region will have to unpick exactly what has been imposed and whether to maintain existing ties with the country as they head into the renewals season.

The US House of Representatives has voted overwhelmingly to punish Turkey for its invasion into northern Syria, and the resolution, which passed 403-16, symbolises deteriorating Turkish-American relations, causing further insecurity for insurers.

This follows the lifting of sanctions imposed against Turkey's Ministry of National Defence, Ministry of Energy and Natural Resources and three senior government officials, 23rd October.

Turkish president, Recep Tayyip Erdogan said Turkey “strongly condemns” the bipartisan bill to sanction senior Turkish officials and its army, but if the bill receives more than two thirds of the votes in the Senate as well, president Donald Trump will be unable to veto it.

According to Elborne Mitchell, this uncertainty will continue to cause headaches for insurers.

“Events over the past three weeks have revealed not only how volatile US-Turkey relations currently are, but also how challenging this environment is for insurers and brokers trying to execute the best strategy in this region,” said partner at the law firm, Andy Stevenson.

“After the US imposed economic sanctions on Turkey on 15th October, the insurance market was left scrambling to work out whether they were at risk for any of the targeted entities and individuals. However, just eight days later, the Trump administration lifted the sanctions. In the latest twist, the US House of Representatives passed the Protect Against Conflict by Turkey Act last week, which, if it passes into law, will impose financial and travel restrictions on the Turkish government and on senior officials connected to Turkey's offensive in Syria. The Act also singled out the majority state-owned bank Halkbank for restrictions.

The bill would freeze the US assets of top government officials and cancel their US visas while imposing sanctions on certain Turkish banks and insurers may struggle with some of the complexities involved.

“What is unusual about the Act is that it received rare bipartisan support in the House. The measure passed 403-16, with 176 Republicans voting in support and just 15 opposing the bill. That suggests a groundswell of political support for the reintroduction of sanctions against Turkey,” he added.

“Although the fighting on the Turkish/Syrian border is now off the front pages of the newspapers, the insurance market needs to remain on alert. This is particularly so as we head into the renewal season and underwriters have to assess whether they want to maintain existing ties with Turkey or whether they need to look again at premiums and exclusions.”

Further sanctions could pose a new level of compliance challenges for the insurance industry due to the size of the Turkish economy and its incorporation into the global economy.

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