Ship insurers to resume near full coverage for Iran oil: Officials

A cargo ship leaves the Tanjong Pagar container port in Singapore on Tuesday. (AFP)

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 could cap any major rise in exports.
“There will be no US-domiciled reinsurer participation on the 2017 IG reinsurance program,” Andrew Bardot, secretary and executive officer at the International Group (IG) of P&I Clubs in London told Reuters on Tuesday.
The new arrangements take effect on Feb. 20, he and other officials said.
“This will substantially address the potential shortfall in reinsurance recoveries in the event of Iranian-related claims,” Bardot said in an e-mail.
To plug the shortfall by US insurers, the group of the world’s top 13 ship insurers created so-called “fall-back” insurance last year, under which tankers carrying Iranian oil were insured up to around $830 million 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.
The government of Japan, one of the biggest buyers of Iranian crude, is working to extend a sovereign insurance scheme it started in 2012 to continue Iranian oil imports in the year starting in April, to cover any shortfalls from the P&I insurance, a senior government official told Reuters.