Sanctions and insurance in Estonia: claims, premiums and nullity

Estonia borders Russia and has extensive trade and logistics links in the region. Since 2014, and especially since 2022, EU sanctions against Russia and Belarus have had a direct effect on Estonian insurance business: cargo and marine policies, motor insurance of vehicles, property in Estonia owned by sanctioned persons, claims payments to designated persons, and ransom payments in cyber incidents. This guide explains the Estonian legal framework and its consequences for insurance contracts and claims.

1. The legal framework

• EU sanctions regulations (for example Council Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine, and Council Regulation (EU) No 269/2014 on asset freezes) apply directly in Estonia.¹
• The International Sanctions Act (rahvusvahelise sanktsiooni seadus, RSanS) implements EU and UN sanctions in Estonia, allows the Estonian government to impose national sanctions and designates the competent authorities.²
• Competent authority. For financial sanctions, the competent authority is the Financial Intelligence Unit (Rahapesu Andmebüroo) (RSanS § 11 lg 3 p 3).²

2. Nullity of transactions violating sanctions

A transaction that violates an international sanction is void (RSanS § 7 lg 1). If the competent authority subsequently grants an authorisation for the transaction under § 11 lg 2, the transaction becomes valid from the date it was made (§ 7 lg 2).²

For insurance, this means:

• an insurance contract concluded in breach of a sanction (for example insuring a designated person's property or providing prohibited insurance services) is void (tühine) from the outset, without any declaration (see ending the contract);
• a claims payment to a designated person in breach of an asset freeze is void as a transaction and exposes the insurer to administrative and criminal liability;
• restitution of premiums and payments follows the general rules on unjustified enrichment, subject to the sanctions themselves (frozen funds cannot simply be returned).

3. Sanctions clauses in policies

Most international wordings contain a sanctions limitation and exclusion clause (for example the LMA 3100 family), which provides that the insurer is not liable to provide cover or pay a claim to the extent that doing so would expose it to sanctions. Under Estonian law:

• such a clause is a genuine exclusion in so far as it reflects legal prohibitions; it does not depend on the policyholder's conduct, so the fault and causation tests of VÕS § 452 lg 2 do not apply;³
• clauses that go beyond legal prohibitions (for example referring to "any sanctions of any jurisdiction", including non-EU sanctions that do not bind the insurer under EU law) must be clear and are subject to standard-terms control (Law of Obligations Act (võlaõigusseadus, VÕS) §§ 37, 39, 42);
• the EU Blocking Regulation (Council Regulation (EC) No 2271/96) must be considered where a clause refers to the third-country laws listed in its Annex, which currently comprise United States sanctions legislation concerning Cuba and Iran; art 5 prohibits EU persons from complying with those laws unless authorised.

4. Claims handling

Before paying a claim, the insurer should:

1. screen the policyholder, insured persons, beneficiaries, injured parties and payees against EU, UN and Estonian sanctions lists;
2. screen the ownership and control of corporate parties (the "owned or controlled" test under EU guidance);
3. check whether the insured interest itself falls within a prohibition (for example goods or vessels subject to restrictions);
4. if a designated person is involved, refrain from payment and consider applying to the Financial Intelligence Unit for an authorisation;
5. document the decision; a refusal to pay based on sanctions should identify the legal prohibition rather than merely cite the clause.

A refusal based on sanctions should still contain the § 475 lg 3 warning if the insurer wishes the one-year action period to run (see limitation).

5. Ransomware and cyber extortion

Ransom payments are not as such prohibited in Estonia, but a payment to a designated person or entity, or to a wallet controlled by one, is prohibited and void. Cyber policies typically require the insurer's consent to extortion payments and a sanctions check. The breach coach should coordinate threat intelligence on the attacker group with sanctions screening. See breach coach for cyber incidents.

6. Motor, cargo and marine

• Motor. Green Card and MTPL claims involving vehicles registered in Russia or Belarus require careful handling of both the EU sanctions measures in force at the relevant time and the motor insurance rules.
• Cargo. Cargo insurance is outside the semi-mandatory policyholder protection (VÕS § 427 lg 2 p 3), so sanctions and war exclusions in Institute Cargo Clauses apply according to their terms. Transit of sanctioned goods through Estonia can lead to seizure and loss claims.
• Marine. The provision of insurance and reinsurance for maritime transport of certain goods is subject to EU restrictions.

7. Practical recommendations

1. Include a clear sanctions clause compliant with EU law.
2. Screen at inception, renewal, claim notification and payment.
3. Treat sanctions nullity as a legal consequence, not as a defence that requires a declaration.
4. Keep records of screening and decisions for supervisory purposes.
5. Seek Estonian legal advice before applying for authorisations or making payments where a designated person may be involved.

Related pages

• War exclusions and cyber
• Ending the contract
• Breach coach for cyber incidents
• Cargo and CMR claims
• Claims handling practice in Estonia

References