New Delhi allowed its state-run insurers to provide limited cover to Indian ships transporting Iranian oil, paving way for refiners to receive uninterrupted supplies from Tehran.
India’s Insurance and Regulatory and Development Authority (IIRDA) announced state-run insurers can replace their European counterparts, enabling at least Shipping Corp Of India to resume transporting Iranian oil, officials said.
Iran’s fleet of oil tankers is ageing due to decades-old sanctions imposed by the United States on the Islamic Republic, making it tough to keep supplies flowing to its top two crude buyers.
China and India have asked Iran’s oil shipper, NITC, to deliver crude in its vessels as the European Union oil embargo came into effect on 1 July which bans firms from insuring Iranian shipments.
India won a last-minute waiver from Washington after cutting its Iranian oil purchases by more than a fifth. Sources said New Delhi is expected to load around 300,000 barrels per day this month. However, NITC is struggling to meet the requirements of Indian refiners due to issues with size and conditions of the vessels.
“This is a classic case of how three Indian industries – insurance, shipping and oil – are coming together for the nation and its energy security,” Anil Devli, chief executive of the India National Shipowners’ Association, told Reuters.
Devli explained that Indian domestic insurance firms will be allowed to provide ship owners carrying Iranian oil $50 million in cover against pollution and personal injury claims, also known as protection and indemnity (P&I) insurance. An additional cover of $50 million will also be provided to protect ships against physical damage.
Reports said General Insurance Corp of India will be the re-insurer and cover will be extended by any of four state-run non-life insurance firms: United India Insurance, New India Assurance Co. Ltd., National Insurance Co. Ltd. and the Oriental Insurance Co. Ltd.
“We have received a letter from the shipping ministry … saying General Insurance Corp has provisionally been allowed to arrange cover,” said a source at a state-run refiner told Reuters.
India’s shipping companies will be responsible for paying any claims above $50 million. However, they will be exposed to potentially billions of dollars in the event of an oil spill.
“$50 million is not enough. If you had wreck removal, you would burn through $50 million in just getting the ship out before going anywhere near coverage for the pollution itself,” said Ian Teare, Singapore-based maritime insurance expert with legal firm Norton Rose.
Tokyo, In comparison, took the unprecedented step of providing insurance of up to $7.6 billion for shipments to keep oil trade with Tehran going.
Only state refiners follow government rules on chartering vessels for crude imports, while private firms like Essar Oil , a Indian client of Iran, face no such restriction.
Citing an industry source, a Reuters report said last week that Indian refiners are scheduled to lift 9.32 million barrels or about 300,650 bpd of Iranian oil in July.