But the shipowners say the government insurance is too limited and they won’t use it.
“There are many problems with the policy being offered … No, we are not going to use it as long as problems are there,” S. Hajara, chairman of Shipping Corp of India, the country’s biggest shipowner, told Reuters Monday.
India’s state-run insurers are providing cover of $50 million each per voyage against pollution and personal injury claims, also known as protection and indemnity (P&I) insurance, and for hull and machinery to protect ships against physical damage.
The amount is a fraction of the typical $1 billion to $2 billion coverage that a supertanker carrying around 2 million barrels of crude would have.
Their resistance means India’s refiners will have to use Iran’s own insurers and tankers for their imports—or buy elsewhere.
Starting July 1, EU sanctions banned European insurers and reinsurers from covering tankers carrying Iranian crude anywhere in the world, forcing New Delhi to draw up its own policy.
The problem isn’t insurance, but re-insurance. Insurers re-insure their policies with firms that are mostly based in Europe and that no longer re-insure Iranian cargoes. Re-insurance is essentially an insurance company buying insurance. And no insurance company will risk a possible billion-dollar pollution claim from a tanker spill on its own.
Great Eastern Shipping Co (Gesco), a private Indian firm, has also refused to carry Iranian crude with the insurance available from Indian state-run companies.
“We have conveyed to MRPL [India’s largest refiner] that we will not be able to lift cargoes from the sanctions-hit country due to inadequacy of the insurance cover offered by the Indian insurer, United India Insurance Co,” Gesco spokeswoman Anjali Kumar said.
Hajara also said $50 million hull and machinery cover for a very large crude carrier is not adequate and the shipping companies have asked for higher cover.
An Oil Ministry official last week said the government is considering doubling hull and machinery cover to $100 million per voyage.
So far private shipper Mercator Ltd has expressed interest in lifting Iran oil and had offered its tanker Omvati Prem to MRPL.
“They offered Omvati Prem because it is an old vessel, otherwise no one will go to Iran. No shipping company in India or in the world has a balance sheet to bear compensation arising due to a pollution incident,” said a shipping expert.