The lifting of nuclear-related economic sanctions has expanded the range of insurance and reinsurance coverage that can be offered for the transportation of Iranian oil. However, some restrictions remain.
The Lloyd’s of London insurance market said that from a European Union perspective, its managing agents can now provide insurance and reinsurance for the transportation of Iranian oil and petroleum products, following the lifting of sanctions. However, it noted that some restrictions on US trade remain in place.
“The US has also lifted sanctions on Iran regarding the oil and shipping sectors, although principally this relief targets non-US persons conducting business with Iran,” Mr Sean McGovern, Lloyd’s Chief Risk Officer, said in a market bulletin.
“With a few exceptions, the general US trade embargo on Iran remains in place and US persons remain prohibited from conducting most business with Iran.”
P&I coverage for tankers
Meanwhile, Bloomberg has reported that the National Iranian Tanker Co (NITC) is close to obtaining new insurance needed to boost crude exports and resume trade with customers.
NITC has been negotiating with foreign organisations for the past six months to get its vessels classified, insured against risks like oil spills and registered internationally, and is “close to an agreement”, Mr Nasrollah Sardashti, the company’s Director of Commercial Affairs, said in an interview with Bloomberg. All three conditions are needed for Iran to be acceptable to previous major buyers, including those in Europe, he said.
Iran has been allowed to ship oil to China, India, South Korea, Turkey and Taiwan after sanctions were tightened in 2012. The country has been using Kish P&I, backed in part by the government, for insurance on existing shipments and now needs to go the International Group of P&I Clubs for expanded coverage, Mr Sardashti said. The organisation’s 13 members protect more than 90% of the world’s crude carriers against risks including spills.
Impact on Indian insurers
In India, Mr G Srinivasan, Chairman and Managing Director of New India Assurance said that the sanctions had meant a lot of difficulties for Indian insurers which insured refineries that imported Iranian crude, reported Business Standard.
“Now, we will get capacity from reinsurers and even Iranian reinsurers could come forward to provide a cover,” he said.
Insurers had declined to extend full coverage to Indian refiners processing Iranian crude, citing the lack of reinsurance coverage. As a result, an INR20-billion (US$293.2 million) Indian Energy Insurance Pool was proposed to cover the refineries. However, this failed to take off due to differences in opinion between oil companies and the government on the size of the cover and pool. Also, state-owned general insurers had invited private-sector counterparts to be part of the pool, but none agreed to participate, citing the high associated risks.
Securing international insurance cover as well as reconnecting with the international banking system will be key to determining how quickly Iran can ramp up oil exports and re-engage with the foreign shipping sector.
INR1 = US$0.01