IG strikes deal over Iranian insurance

Marine insurers will be able to provide virtually full coverage for Iranian oil exports from February after the International Group of P&I Clubs inked a deal to provide cover without involving US-domiciled reinsurers. The new arrangement allows the reinsurance of ships without the involvement of US firms or capital.

IG secretary and executive officer Andrew Bardot told Reuters that “there will be no US-domiciled reinsurer participation on the 2017 IG reinsurance programme”, which kicks in from February 20th. “This will substantially address the potential shortfall in reinsurance recoveries in the event of Iranian-related claims”, he said.

Sanctions on Iran were lifted after a 2015 deal, but some prior US sanctions remain in place, preventing US reinsurers from participating in Iranian cargo cover.

Last year IG created “fall-back” insurance, under which tankers carrying Iranian oil were insured up to around $830m per ship, but this was below the normal coverage for a tanker. For the 2017/18 year normal coverage will apply up to $3.08bn 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.

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. Jonathan Hare, general counsel with Norway-based marine insurer Skuld, said that banking restrictions under the remaining US sanctions are also likely to stay in place for some time and constrain Iran’s trading activities.