Bloomberg news reports that about 95 percent of the world’s tankers are insured by European firms.
The International Group of Protection and Indemnity Clubs insures all but 5 percent of the global tanker fleet and its 13 member clubs follow European rules to participate in the claim-sharing pool, said Andrew Bardot, the London-based secretary and executive officer. Carrying Iranian oil would invalidate the ships’ cover against risks including spills and collisions, he said.
“Any EU-regulated insurer will not be able to provide insurance to cover any ship engaged in the carriage of Iranian oil and petrochemicals to the EU and elsewhere,” Bardot said. “We have already notified ship owners of the effect on their trading activities and our ability to cover.”
This means that a non-European ship carrying Iranian oil to a non-European buyer is no longer able to get any insurance or re-insurance from European firms. That sanction took effect immediately on January 23 when the EU approved its list of sanctions on Iran.
The European role in insuring ships will hit Iranian sales globally, but it isn’t clear to what extent. Shippers will be able to go to non-European (and non-American) insurers, but there are not many of them that handle marine insurance. How many may be interested in entering that field is unknown and how soon they could do so is also uncertain. Some tanker firms may prefer just to abandon any business with Iran.
Simon Schnorr, a London-based marine client director at Aon Risk Solutions, a unit of the world’s largest insurancebroker, told Bloomberg that vessels carrying oil from Iran will have to use “questionable” insurance, which some tanker firms may be unwilling to do.
The EU sanctions apply to shipping companies with no European link because of their insurance policies, according to Intertanko, the largest trade group representing tanker owners. Members include Hamilton, Bermuda-based Frontline Ltd. and Tokyo-based Kawasaki Kisen Kaisha Ltd.
“The EU ban on related insurance and re-insurance means that owners or operators with no EU link who seek to transport Iranian oil will be caught even if there is no EU element to the shipment itself,” Michele White, Intertanko’s general counsel, told Bloomberg. “This is now a highly restrictive and volatile environment in which we feel our members cannot trade without risk of breaching EU or indeed the myriad of other sanctions against Iran.”
Ship owners will struggle to find insurance that doesn’t comply with EU law and whose provider has the funds needed to meet the “standard cover provision” of $1 billion for pollution liabilities, Schnorr said. Ships without valid insurance would be barred from entering most ports, he said.
“Unless they decide to do it uninsured or under questionable insurance coverage, it will be difficult for the vast majority of reputable ship owners to continue trading with Iran,” Schnorr said. “In many places, if they call [at a port] with alternative cover, they probably won’t be accepted.”
China and Japan have said they will still buy Iranian oil. The Japan Ship Owners’ Mutual Protection & Indemnity Association, the Asian nation’s only organization insuring ocean-going and coastal vessels, is a member of the European-based International Group of P&I Clubs, according to its website, and thus comes under the EU sanctions. The group doesn’t list any Chinese members.
