India approves 2 iranian ship underwriters

Apr 09, 2013 12:00 AM

India has approved two Iranian ship underwriters among nine new ship insurers who are not part of a global body and whose liability cover against risks will be accepted by India's ports.

Kish P&I Club, founded by a group of Iranian ship owners on Kish Island located in the Persian Gulf, and Tehran-based Moallem Insurance Co., are the two underwriters whose applications were accepted by India's Directorate General of Shipping, the ISNA News Agency reported.

The other approved underwriters include the U.K.'s Royal & Sun Alliance Insurance P.L.C., Germany-based Hanseatic Underwriters and Russia-based Ingosstrakh Insurance Co.

According to Livemint Daily, the approval comes as India implements new rules, making it mandatory for foreign ships entering the country's ports to hold a valid third-party liability cover against maritime claims.

Such third-party liability risks have to be insured with the London-based International Group of Protection and Indemnity Clubs (IG Clubs) or such other insurance company authorized by the government, according to the new rules that took effect from 20 April last year, business daily Min reported.

In shipping, third-party liabilities arising from operating ships such as oil pollution, wreck removal and damage to port property are commonly referred to as protection and indemnity (P&I).

Globally, such third-party risks are insured with the IG Clubs, a 13-member group based in London that provides liability cover for about 90% of the world's ocean-going ships, placing a $1 billion limit on individual claims that involve pollution damage and wreck removal.

The European Union has banned the purchase, transport, finance and insurance of Iranian oil from 1 July, reacting to its nuclear programme. Following the EU ban, IG Clubs have stopped providing third- party liability cover to ships hauling Iranian crude oil.

India, the second-biggest buyer of Iranian crude after China and struggling with the fallout of the embargo, has adopted a two-pronged strategy to deal with the EU ban.

It has allowed state-run oil refiners to buy crude with ships and insurance arranged by Tehran on a case-to-case basis. It also asked state-run insurer United India Insurance Co. Ltd to provide cover to Indian ships hauling Iran crude for state-run oil refiners.

Accordingly, in July 2012, United India Insurance launched a $50 million third- party liability cover against pollution damage, wreck removal and personal injury claims for local ships transporting Iranian crude.

The firm also agreed to extend a separate $50 million cover for hull and machinery to protect local ships against physical damage.

Both the strategies have met with limited success mainly because the National Iranian Tanker Co. does not have enough ships that are suitable to call at Indian ports, while local tanker owners said the United India cover was inadequate for them to travel to Iran to lift the crude.

Mohammadi Banaei, chief executive officer of Kish P&I Club, said that the recent developments, mainly political, have affected the shipping business.

"This had led to a tendency to form new P&I Clubs, insurance companies which could loosen the stranglehold of ship underwriters based in Europe," he said in a phone interview from Iran.

"Ship insurance business controlled by a group or limited number of nations cannot be fair and cannot serve the best interests of the people," Banaei said.

"The IG Clubs based in Europe have a political face and have become more of a political business rather than give a fair service to the people. They want to control everything; they want to control the world. By controlling shipping, they can control the trade."

Kish P&I Club can cover ship owners' liabilities up to $500,000 and has reinsured their liabilities above $500,000 up to $1 billion with a consortium of Iranian Insurers backed by a sovereign guarantee from the government of Iran, Banaei said.

The cover can be taken by any ship, not necessarily Iranian, that hauls crude oil and petrochemical cargo exported by that country.

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