Japan’s P&I Club will only be able to provide a fraction of the coverage to tankers transporting Iranian oil under new European Union (EU) sanctions, the club officials have revealed.
According to reports in The Maritime Executive, club officials have stated that Japan Club rules exclude any recovery or indemnity where the liabilities, costs or expenses are not recoverable from the club’s reinsurers due to sanctions.
Japan’s P&I Club does not directly fall under the sanctions rule, but relies heavily on the European reinsurance market to hedge its risk.
Effective from July 2012, the European insurers and reinsurers will be prohibited from indemnifying ships carrying Iranian crude and oil products anywhere in the world as per the sanctions imposed on Iran in the wake of its suspected nuclear weapons programme,as reported by Reuters.
Down from the existing $1bn coverage, the insurer will now only be able to provide coverage valued at a maximum $8m per tanker with an industry official claiming that, if the Club covers more than that, it may go bankrupt with only one accident.
The insurer is expected to issue a circular early next month outlining its policy on Iran, which is likely to include cuts to coverage.
Any reductions would force club members willing to continue Iranian oil import, obtain additional coverage from outside the Japan P&I club, possibly in China, Russia or the Middle East.
Japan P&I Club is the only Asian-based member of the Group of International P&I Clubs, an association of customer-owned ship insurers which covers 95% of the world’s tankers against pollution and personal injury claims.