State-run insurers to give $50 mn cover for Iran oil buy

New Delhi: State-run insurers have agreed to give limited cover to local ships for carrying Iranian oil, helping the energy-hungry country import reduced volumes from sanctions-hit Tehran from July, a Shipping Corp of India director said on Tuesday.

“We have in writing from General Insurance Corp that it and four other insurers will provide a cover of $50 million to Indian flag carriers per Iranian voyage,” Sunil Thapar of Shipping Corp of India, the country’s largest shipping firm with a fleet of 29 crude carriers, told Reuters.

Tough new European Union (EU) sanctions aimed at stopping Iran’s oil trade also ban EU insurers and re-insurers from indemnifying ships carrying Iranian crude from July.

China, another key oil client of Iran, is considering sovereign guarantees for its ships to continue importing oil.

The amount of protection and indemnity (P&I) cover on offer from Indian firms is just a fraction of any liability that may arise needing third-party P&I cover, but still higher than Japan’s offer of just $8 million cover.

Thapar said with the new insurance facility the Indian fleet should be able to meet demand from the oil industry. India has reduced Iranian oil imports by about a quarter in 2012-13.

Iran, OPEC’s second-largest producer, exports most of its 2.2 million barrels of oil per day to top Asian buyers China, India, Japan and South Korea.

In fiscal year 2011-12, New Delhi imported less than 340,000 bpd oil from Tehran against a contracted 362,000 bpd, and is now buying 280,000 bpd.

Thapar said General Insurance Corp of India will be the re-insurer and the cover will be extended by any of the four firms - United India Insurance, New India Assurance Co. Ltd., National Insurance Co. Ltd. and The Oriental Insurance Co. Ltd.

Shipping Corp, Great Eastern Shipping Co Ltd, India Steamship and Mercator Lines are among the companies that stand to benefit if they take the cover.

He said it would take some time for the new facility to be available because the insurance regulator’s approval was needed. “This will be an exposure to their balance sheets.”

Indian shipping firms will continue to transport Iranian crude even if limited insurance coverage due to tightening Western sanctions leaves them financially exposed to a spill or accident, a top executive and industry sources said last month.