West­ern in­sur­ers re­build busi­ness ties with Iran

Cau­tious in­vestors seek to reen­ter lu­cra­tive mar­ket

Kuwait Times - - BUSINESS -

LONDON: West­ern in­sur­ers are slowly reach­ing deals with Iran as they seek to re-en­ter a multi-bil­lion dol­lar mar­ket al­though the pace of busi­ness is ham­pered by bank­ing re­stric­tions ten months on from the lift­ing of in­ter­na­tional sanc­tions. Shut out of in­ter­na­tional fi­nan­cial mar­kets for years, Iran is still try­ing to reap the ben­e­fits of last year’s nu­clear deal with world pow­ers.

De­spite the re­moval of in­ter­na­tional bank­ing re­stric­tions in Jan­uary, Tehran has se­cured ties with only a lim­ited num­ber of smaller banks as US sanc­tions re­main in force. By con­trast, Iran is in more ac­tive talks with in­sur­ers to pro­vide cover in a mar­ket val­ued at $9 bil­lion over­all last year and po­ten­tially dou­ble that in the next decade.

West­ern com­pa­nies need in­sur­ance in or­der to re­sume busi­ness with Iran. Ship­ping and trade credit in­sur­ance, which re­move the risk of non-pay­ment for goods, are the first types of in­sur­ance be­ing of­fered. “There is gen­er­ally a lower de­gree of fear and ap­pre­hen­sion and that is be­cause you have not had the big fines on the in­sur­ers that the banks have faced,” said lead­ing London sanc­tions lawyer Nigel Kush­ner.

“We are go­ing to see greater and quicker move­ment there than on the bank­ing side, at least in London and the UK,” said Kush­ner, who is also a di­rec­tor of the Bri­tish Ira­nian Cham­ber of Com­merce.

As Iran has aimed to ramp up oil ex­ports, se­cur­ing ma­rine in­sur­ance has been cru­cial. Top tier West­ern ship in­sur­ers have started of­fer­ing ser­vices in re­cent months. Iran’s deputy oil min­is­ter, Amir Hos­sein Za­maninia, has said Euro­pean in­sur­ers now have no prob­lems in­sur­ing Ira­nian oil tankers, ac­cord­ing to the oil min­istry’s news agency SHANA. Pro­tec­tion and In­dem­nity (P&I) clubs - ma­rine in­sur­ers owned by ship­ping firms - have started to pro­vide cover for Iran’s ship­ping fleet, in­clud­ing its oil tankers.

Jonathan An­drews, di­rec­tor and head of east­ern un­der­writ­ing with Bri­tain’s Steamship Mu­tual, said it was in­sur­ing ships for Ira­nian tanker op­er­a­tor NITC and also for Ira­nian cargo ship op­er­a­tor IRISL.

“We have a long his­tory of in­sur­ing Ira­nian ship own­ers,” An­drews told Reuters. “We are happy to be in­sur­ing our for­mer mem­bers again.” Nor­we­gian ship in­surer Skuld said it was in dis­cus­sions with IRISL, while it was al­ready in­sur­ing NITC ships.

Oth­ers such as the UK’s Stan­dard Club said they were cov­er­ing ves­sels trad­ing to and from Iran, but did not say whether this re­lated to Ira­nian ship­ping firms. Ship in­sur­ers say there are still con­straints on pay­ments, given a freeze on us­ing the US fi­nan­cial sys­tem. “Prob­lems re­main how­ever in re­la­tion to the chan­nelling of pay­ments through the bank­ing sys­tems, both in re­la­tion to col­lec­tion of pre­mium and set­tle­ment of claims,” said An­drew Bar­dot, ex­ec­u­tive of­fi­cer with the In­ter­na­tional Group, which rep­re­sents ship in­sur­ers.

This was due to the re­luc­tance of many banks and fi­nan­cial in­sti­tu­tions to process such pay­ments, and was now the main con­cern for in­sur­ers and rein­sur­ers, he said. “So­lu­tions are be­ing found, but it is a dif­fi­cult process and likely to re­main so for the fore­see­able fu­ture.”

DOL­LAR RE­STRIC­TIONS

US banks are for­bid­den to do busi­ness with Iran un­der do­mes­tic sanc­tions still in force. Euro­pean banks also face prob­lems, since trans­ac­tions with Iran in dol­lars can­not be pro­cessed through the US fi­nan­cial sys­tem. Banks re­main ner­vous af­ter some heavy US penal­ties, in­clud­ing a $9 bil­lion fine on France’s BNP Paribas in 2014, largely for vi­o­lat­ing US fi­nan­cial sanc­tions.

De­spite this, Euro­pean ex­port credit agen­cies are guar­an­tee­ing trade fi­nance for West­ern com­pa­nies do­ing busi­ness with Iran. Ger­many’s state run ex­port credit group Her­mes has con­cluded trade fi­nance deals cov­er­ing goods worth sev­eral mil­lion eu­ros.

“About a dozen trans­ac­tions have been ap­proved so far,” a Her­mes spokesman said. “The de­mand is there from the ex­porters’ side but they need a lot of in­for­ma­tion. There is a con­tin­u­ous and ris­ing flow of ap­pli­ca­tions (for ex­port credit guar­an­tees).” — Reuters

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