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Chubb Limited settles with OFAC for $66,212

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ACE Limited (“ACE”) was a Swiss company that provided insurance and reinsurance services for commercial and individual customers worldwide. In January 2016, ACE merged with Chubb Corporation to create Chubb Limited (“Chubb”), which is a Swiss holding company headquartered in Switzerland. Prior to the merger, ACE Group Holdings, Inc. was a subsidiary of ACE, and an insurance holding company incorporated in the United States (U.S.). Through a series of intermediate corporate entities, ACE Europe was a subsidiary of ACE Group Holdings, Inc. ACE Europe was domiciled in the United Kingdom (U.K.), and conducted business in Europe. As a subsidiary of a U.S. company, ACE Europe was subject to the Cuban Assets Control Regulations. Chubb has agreed to remit $66,212 to settle its potential civil liability for 20,291 apparent violations of the CACR. The Office of Foreign Assets Control (OFAC) has determined that ACE made a voluntary self-disclosure of the Apparent Violations, and that these Apparent Violations constitute a non-egregious case. The total base penalty amount for the apparent violations was $183,923.52.

Between January 1, 2010 and December 31, 2014, ACE Europe processed at least 20,291 transactions totaling $367,847 in apparent violation of the CACR. This transaction total included 20,218 premium payments totaling $287,292 that ACE received for Cuba-related travel insurance coverage of insureds’ travel to Cuba, as well as 73 Cuba-related claims payments paid out under these coverages totaling $80,555. The apparent violations appear to have been caused by ACE’s misunderstanding of the applicability of U.S. sanctions on Cuba with respect to this activity.

ACE provided customers with travel-related coverage via individual travel insurance policies issued to a specific traveler, group travel related policies issued to a group policyholder extending coverage to the group’s individual members or employees, and travel insurance policies provided at No Additional Charge (“NAC”) to a group policyholder to cover the group’s individual members or customers. The coverages insured travel-related risks, including lost, damaged or delayed baggage or property, death benefits, medical expenses, repatriation of deceased, and trip cancellation or delay. The policies were sold through either direct sales by ACE or a third party.

Beginning in 2012, ACE Europe issued group travel policies to a European online travel agency (“European travel agency”), which sold global travel coverage to insureds. The insurance was provided through master agreements that ACE negotiated with the European travel agency, with the travel agency’s subsidiaries acting as group policyholders, and their travel clients acting as the individual certificate holders under the group policies. Under these arrangements, the European travel agency dealt with customers directly, with a third party agent processing claims. The European travel agency paid ACE Europe a pre-determined premium for each specific individual covered under the group policy. The European travel agency offered separate travel insurance products that provided global travel coverage for flight or hotel cancellation that may include medical expenses or lost baggage as well as the loss of connecting flights.

While global in scope, these policies did not contain a sanctions exclusionary clause, which is often inserted in global insurance policies as an explicit exclusion for risks that would violate U.S. sanctions law. In 2013, ACE Europe signed agreements with two additional subsidiaries of the European travel agency located in the United Kingdom. ACE authorized the European travel agency to issue individual policies to its travel clients for comprehensive or trip cancellation coverage. These individual policies also provided for global coverage without sanctions exclusionary clauses.

By providing this coverage and engaging in these transactions, ACE appears to have violated section 515.201 of the CACR, which prohibits persons subject to the jurisdiction of the United States from engaging in transactions in which Cuba or a Cuban national has an interest.

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