Ship insurers to resume near full coverage for Iran oil
TOKYO/SINGAPORE: Global shipping insurers have devised a way to ensure nearly full coverage for Iranian oil exports from next month after striking a deal to provide cover without involving US-domiciled reinsurers, officials in Tokyo and London said.
Restrictions on US firms handling Iranian goods had greatly limited the number of reinsurers of cargoes, but the new arrangements — which essentially allow re-insurance of ships without the involvement of US firms — should boost the number of eligible shipments.
That will provide a boon to Iran, which is trying to raise oil exports after most sanctions were lifted last year, though banking restrictions that remain in place that could cap any major rise in exports.
“There will be no US-domiciled reinsurer participation on the 2017 IG reinsurance programme,” Andrew Bardot, secretary and executive officer at the International Group (IG) of P&I Clubs in London said on Tuesday.
The new arrangements take effect on February 20, he and other officials said.
“This will substantially address the potential shortfall in reinsurance recoveries in the event of Iranianrelated claims,” Bardot said in an email.
The sanctions were lifted after a landmark deal in 2015 with world powers that put constraints on Iran’s nuclear activities.
But some prior US sanctions remain in place, which had meant US reinsurers could not participate in covering Iranian cargoes.
To plug the shortfall by US insurers, the group of the world’s top 13 ship insurers created so-called “fallback” insurance last year, under which tankers carrying Iranian oil were insured up to around $830m per ship.
That was below normal coverage for a tanker and risk-averse shippers refrained from lifting cargoes.
However, it still allowed Iran to more than double crude exports from as low as about 1 million barrels per day (bpd) at the height of the sanctions. Iran’s exports were as high as 3 million bpd before the sanctions.
From next month, normal coverage will apply up to $3.08 billion and compensation beyond that up to $7.8 billion for accidents and oil spills would be collected from shipping companies insured by P&I group members.