‘Permanent’ insurance plan for Iran

Iran wishes for “permanent authorisation” from India for its two local insurance companies in order to enable Iranian ships with Iranian insurance cover to call at Indian ports to help maintain oil supplies from the Persian Gulf nation when new sanctions imposed by the US.

The proposal was forwarded by M Sarmadi, Managing Director at the India office of Iran’s state-run National Iranian Oil Company, during a meeting with the top officials of the Shipping Ministry.

India had to struggl to get tankers and insurance for transporting oil from Iran after the US and the European Union imposed sanctions on the Islamic Republic , forcing western insurers to halt insuring ships hauling crude from Iran. Following the sanctions, London-based International Group of Protection and Indemnity Clubs (IG Clubs) stopped providing third party liability cover to ships hauling Iranian crude.

The IG Clubs, which is a 13-member group, insure around 95 % of the world’s tankers, depositing a $1-billion limit on individual claims involving pollution damage and wreck removal.

It is not sure whether India would insist on a bank guarantee from Tehran through an Indian bank to cover any potential liability in the event of maritime accidents in Indian waters as a pre-condition for granting permanent authorisation to the Iranian P&I Clubs. India had sought such a bank guarantee for Rs. 2,300 crore during the earlier round of sanctions.

India had imported 4.46 million barrels per day (bpd) of oil in the year to March 2018. Of this, 458,000 bpd of oil was purchased from Iran, India’s third biggest supplier after Iraq and Saudi Arabia.

The state-run refiners were weighing plans to raise Iranian oil imports on the back of freight discounts offered by Iran that increase as more barrels were purchased. Indian crude buyers would be dependant on Iranian tankers.

According to a London-based shipping and asset-finance law firm, most loans to buy vessels require insurance against risks, including spills and collisions, and banks normally only accept cover provided by members of the IG Clubs. “If the insurances are not in a form that’s acceptable to the bank, that’s an immediate event of default and the bank would have the right to foreclose,” the executive added.

“Insurance can be tackled, but the main problem is foreign lenders and bankers, especially from America, who have a strict view on sanctions. That is the main hurdle we have to cross,” said an executive with a Mumbai-based private shipping company.

“A new mechanism can be worked out where payments are not in dollars and then people will start looking at it,” he added.