Global Ship Insurers To Resume near Full Coverage for Iran Oil: Officials
Restrictions on U.S. 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 U.S. firms – should boost the number of eligible shipments; Reuters reported.
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 U.S.-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 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 U.S. sanctions remain in place, which had meant U.S. reinsurers could not participate in covering Iranian cargoes.
To plug the shortfall by U.S. 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.
Other obstacles to lifting Iranian oil remain though, including the incoming administration of President-elect Donald Trump, who has described the nuclear deal as a “disaster” and threatened to scrap it, which could mean new oil export sanctions.
Additionally, owners may still not call on Iran because they could be banned from Saudi Arabian ports on subsequent voyages, a European supertanker broker said.
Saudi Arabia has banned tankers if they have previously carried Iran crude due to tensions between the countries over the conflict in Yemen, the shipbroker said.
There is a premium of between $4,000 to $12,000 per day for foreign-owned ships hired to transport Iranian crude compared with rates to transport crude from other Middle East countries, a Singapore-based supertanker broker said. That could also limit Iranian liftings.
Banking restrictions under the remaining U.S. sanctions are also likely to stay in place for some time and constrain Iran’s trading activities, said Jonathan Hare, general counsel with Norwegian P&I club Skuld.