Nuclear-related economic sanctions on Iran and restrictions on its trading partners imposed by the European Union and the United States continue to cause distress to Indian shipping companies.
The latest blow is that the $50 million-per-ship protection and indemnity (P&I) insurance expected to be offered by state-owned general insurance companies, will likely cover only seven out of the 23 unforeseen contingencies that are usually covered – like third-party liability, oil pollution, wreck removal and damage to property.
A senior official from the general insurance industry confirmed this. “We’re in talks with the ministry concerned and the insurance regulator for providing a partial P&I cover.”
This will hit about seven Indian shippers that transport oil stocks from Iran. Already, India has decided to cut import of Iranian crude by 11% to 15.5 million tonne in 2012-13. Worse, the $50-million-per-tanker P&I insurance cover is much lower than the industry standard of $120 million.
Product approval from the Insurance Regulatory and Development Authority (Irda) for the partial P&I cover is expected in about 20 days. The underwriting risk will be shared equally among all four government-owned insurers. General Insurance Corporation (GIC Re), the only domestic re-insurer, will back them up with re-insurance cover.
“Each insurer will underwrite 1% of the total net worth for providing the specified cover,” added the official.
State-owned insurers said that extending the P&I cover to all 23 contingencies would be a costly affair.
For, traditionally, the London-based 13-member International Group of Protection and Indemnity Clubs (IG Club) used to extend full-fledged third-party P&I cover for almost all ocean-going ships.
But, following the nuclear sanctions against Iran, the IG Club has been hardening its stance against shippers plying the Iran route.
Indian shipping companies are facing another problem with regard to marine and hull(M&H) cover. This insurance is usually provided by Indian insurers and reinsured by European companies. But the European reinsurers have now stopped extending this cover to shippers on the Iran route.
Driven thus to a corner, shipping companies are now pinning their hopes on expectations of a holistic sovereign guarantee from the government for both P&I and M&H covers, said an official at one of the leading shipping companies that operates tankers on the Iran route.
Given the no-win situation, Indian shippers plan to switch from the Iran-India services to alternative routes until a final solution is worked out.
Source: DNA
