The renewal with three red flags

The broker must not bind on the basis of a 92% name match. A sanctions hit is not resolved by noting that the date of birth and nationality differ. The broker should:

• screen the client, its UBO and the vessel against the UK Sanctions List and the OFSI consolidated list, and keep the screens;
• conduct enhanced due diligence on the UBO's ownership and control. If a designated person owns or controls 50% or more, or the client is otherwise caught, the client is effectively designated;
• obtain independent evidence of the UBO's identity, date of birth, nationality and source of funds;
• document the false-positive analysis and have it reviewed by a secondee or compliance officer, not the broker alone.

If the match cannot be resolved, the broker must not bind and must not provide insurance-related services. If the broker knows or suspects that the client is dealing with a designated person or evading sanctions, it should make a suspicious activity report to the NCA and consider reporting to OFSI. It must not tip off the client. The insurer's own sanctions clause and the broker's delegated authority will also require a clear sanctions warranty.

The commission and profit share must be disclosed. The client agreement discloses 15%, but the insurer is offering 25% plus a £75,000 profit share. The extra 10% and the profit share are remuneration that could influence the broker's recommendation. Under FCA rules and the IDD, the broker must act honestly, fairly and professionally in the client's best interests, manage conflicts and disclose the nature and amount of remuneration.

The broker should:

• disclose the 25% and the profit share in writing before binding, with enough detail for the client to understand the incentive;
• obtain the client's informed consent, or decline the extra remuneration if consent is not given;
• consider whether the profit share creates a conflict, because it rewards low loss ratios and may discourage fair claims handling;
• record the disclosure and consent.

The £20,000 introduction fee is a separate red flag. The broker must carry out due diligence on the local agent, have a written agreement, confirm the service is genuine and proportionate, and ensure the payment is not a bribe or facilitation payment. If the agent is a public official or the payment is intended to influence the client, the broker must refuse. The Bribery Act 2010 has extraterritorial effect.

Backdating cover to 1 November is not automatically unlawful, but on these facts it is high risk and should not be agreed as asked. The vessel has been trading without cover since 31 October. Backdating would create retroactive cover for a period when the insured was unprotected. If a loss occurred in that gap, the insured would be presenting a claim for a known loss, and the broker would be facilitating a misrepresentation.

The broker should:

• ask the client and the insurer to confirm whether any incident, casualty or circumstance occurred between 1 November and inception;
• disclose the gap and the trading position to the insurer in writing;
• obtain the insurer's informed agreement to any retroactive cover, with a clear statement that no known loss is covered;
• if the insurer will not backdate, bind from 1 December and advise the client on the uninsured gap, including whether a separate policy or a 'held covered' arrangement is available;
• not backdate a claim or alter records to make the gap disappear.

The broker's duty is to present the risk fairly, not to manufacture continuity. A backdated policy that conceals a known loss is fraud, and it can invalidate the policy and expose the broker to regulatory action.