Sanctions: Global trends, risks and implications for insurers

Sanctions have become a defining feature of the global risk landscape, driven by geopolitical instability and increasingly used as a tool of foreign policy to apply economic pressure.

In a recent webinar as part of our Insurance Emerging Risk webinar programme, contributors from across multiple jurisdictions explored how sanctions regimes are evolving and what this means for insurers operating in an increasingly complex and fragmented regulatory environment.

A rapidly evolving global framework

Over the past 15 years, sanctions have expanded significantly in scale, scope and sophistication across major jurisdictions, including the US, UK and EU. These regimes typically combine asset freezes on individuals and companies with trade restrictions on the movement of certain goods and technologies to sanctioned territories.

A key development has been the shift toward strict liability enforcement, meaning breaches can occur regardless of intent or awareness. At the same time, regulators are issuing frequent updates, new guidance and enhancing enforcement processes, creating a fast-moving and highly technical compliance environment.

Sanctions are also inherently dynamic. Measures can be introduced, expanded or removed quickly in response to geopolitical developments, creating both risk and potential opportunity for international businesses.

United States: Extraterritorial reach

The US continues to operate the most far-reaching sanctions programme. The reach of US sanctions is amplified by the extraterritorial effect of certain sanctions regimes. In addition, non-US entities can be exposed to US sanctions by creating a US nexus, such as dollar transactions or US-linked activity or through secondary sanctions.

Combined with strict liability and active enforcement by US regulators, this creates a high-risk environment for multinational organisations, particularly those operating across complex supply chains or financial networks.

United Kingdom and European Union: Expansion and divergence

The UK and EU sanctions regimes continue to expand, particularly in response to recent geopolitical developments.

In the UK, sanctions are structured around:

• Financial sanctions, focused on asset freezes and restricting the making available of funds and economics resources to designated persons; and
• Trade sanctions, targeting the movement of goods and technologies and the provision of associated services which can include (re)insurance.

Enforcement has strengthened considerably, with increased penalties, greater use of civil enforcement powers and a shift toward strict liability.

EU financial and trade sanctions are very similar to the UK. The EU has significantly expanded its sectoral and transaction restrictions targeting industries such as energy, finance and transportation.

At the same time, divergence between the US, UK and EU sanctions regimes is becoming more pronounced, creating complexity and potential conflicts for multinational businesses navigating overlapping obligations.

Global divergence and countermeasures

Sanctions are no longer globally aligned. In regions such as Asia-Pacific and the Middle East, many jurisdictions maintain more limited domestic regimes, often focused on UN measures, but companies in those regions remain exposed to international sanctions through cross-border activity.

Some of the key risks to navigate include:

• Exposure to US secondary sanctions;
• Introduction of China’s anti-foreign sanctions law, creating competing legal obligations; and
• Russian countermeasures, leading to parallel proceedings and conflicting judgments.

This fragmentation increases legal uncertainty and requires businesses to adopt more sophisticated, multi-jurisdictional compliance strategies.

Insurance sector: Key risk areas

Sanctions risk arises throughout the insurance lifecycle but is most acute in four areas: · Underwriting and placement: Risks may arise through insureds’ operations, counterparties or supply chains, including where the provision of (re)insurance is connected with restricted goods and technologies, sanctioned jurisdictions and/or designated companies/individuals;

• Claims handling: A high-risk stage, where payments may constitute making funds or economic resources available to a designated person, directly or indirectly;
• Ongoing policy management: Sanctions risk evolves over time. Designations and new trade restrictions can occur mid-policy, requiring continuous screening and monitoring; and
• Reinsurance and third-party relationships: Cross-border arrangements and reliance on intermediaries increase indirect exposure and complexity.

In practice, sanctions are still often treated as a one-off onboarding exercise, when they require continuous, active oversight.

Enforcement and compliance pressure

Enforcement activity is increasing globally, with higher penalties, enhanced reporting obligations and a growing emphasis on transparency and early engagement with regulators.

Jurisdictions such as the UK, Canada and Australia are strengthening their frameworks, while regulators are more frequently seeking to publicise enforcement outcomes. This not only increases legal exposure but also raises reputational risk for businesses.

From compliance to strategic risk

Sanctions compliance continues to be a significant risk area for senior management at insurers, extending beyond the compliance function into operational risk and strategic decision-making.

• Issues typically arise not from deliberate misconduct but from:
• Limited visibility of counterparties and beneficial ownership;
• Fragmented systems and incomplete data; and
• Misunderstandings arising from the contours of a difficult and complex sanctions environment.

Addressing these challenges requires integrated governance, robust due diligence and clear escalation frameworks.

A global shift: Risk and opportunity

Sanctions are becoming more complex, more dynamic and more central to transacting international business.

For insurers, this creates both risk and opportunity:

• The need for enhanced due diligence and monitoring;
• Sanctions-awareness in underwriting and claims processes; and
• Increased importance of multi-jurisdictional compliance expertise

As geopolitical tensions continue to shape the regulatory environment, sanctions will remain a critical consideration and a defining feature of global risk for insurers writing international insurance or reinsurance.

Sanctions now sit at the heart of insurance - from underwriting and policy drafting to claims, reinsurance, and global programmes. As regimes evolve and enforcement tightens, even established processes can quickly become exposed.

Our globally recognised team helps insurers navigate overlapping, fast-moving regulations, assess cross-border exposure, and respond to emerging risks in real time. We combine deep sector expertise with international reach to advise on the practical impact of sanctions across trade, shipping, and global risk transfer.

From underwriting guidelines to sensitive claims and cross-border portfolios, we deliver clear, commercially focused solutions that protect your business and support confident decision-making.

Get in touch with our sanctions specialists to strengthen your approach and stay ahead of regulatory risk.