SINGAPORE (Business News) - Hong Kong maritime insurers will not be able to provide full cover to tankers carrying Iranian oil when new EU sanctions take effect in less than three months due to close links to the West, a senior industry official told Business News.
China is Iran's largest oil buyer, and even though Beijing has publicly criticized the imposition of Western sanctions against Tehran, its importers are struggling to find a way around the measures.
Officials with China's P&I club, which covers more than 1,000 ships, told Business News last week the insurer would not provide cover to tankers operating in Iran when new EU sanctions come into effect from July.
Hong Kong insurers will also not step in to fill the void in maritime coverage, said Arthur Bowring, managing director of the Hong Kong Shipowners Association. Hong Kong insurers have a much more international clientele than their mainland Chinese counterparts, with many European firms having offices in the former British colony.
"For the liability coverage that we now need, the reinsurance is essential and that comes from the in ternational market, which of course is affected by the sanctions," Bowring said.
"State-provided cover is the only other alternative, but this could also be difficult in a claim situation, especially if the amounts are in U.S. dollars," he added.
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Iran sanctions graphic link.reuters.com/qeh85s
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A combination of U.S. and European sanctions against Tehran have significantly hindered the ability of Iran's oil customers to continue the financing, purchase and transportation of the OPEC member's crude.
Growing pressure by the West has led some Iranian oil buyers to cut imports, but the problem over obtaining maritime insurance could altogether hal t shipments to Asian customers. Concerns over the disruption to Iranian oil supplies have helped drive global crude prices by more than 13 percent so far this year to above $ 122 a barrel. <O/R>
For the maritime industry, European insurers and reinsurers will be banned from indemnifying ships carrying Iranian crude and oil products anywhere in the world, in line with sanctions on Tehran.
Although many Asian ship insurers, like China and Japan's P&I clubs, do not fall under the sanctions regime, they are largely dependent on the European reinsurance market to hedge their risk.
Japan and South Korea have lobbied for exemptions to the EU sanctions, but insurance and shipping executives say a complete ban now looked likely.
"The one issue that we have highlighted ... is the unfortunate EU sanctions that would remove the po ssibility of liability insurance for ships carrying Iranian oil," Bowring said.
"The effect of this is not on the ownership or carriage of the oil but on innocent third parties who would be affected if one of these ships had an accident and spilled oil. Liability insurance covers liability to third parties and removing this just does not make sense," he added.
Protection and indemnity (P&I) clubs, owned by their shipowner customers, were created to cover shipping companies against personal injury or environmental clean-up claims, dauntingly large costs for most commercial insurers.
A supertanker, which typically can hold 2 million barrels of crude oil, must have P&I coverage of around $ 1 billion to operate within most of the world's ports, industry officials said.
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