TOKYO (Reuters) - Japanese insurers are warning ship owners that they will only cover one tanker at a time carrying Iranian crude oil through the Middle East Gulf due to tightening Western sanctions against OPEC’s second biggest producer, industry sources said.
The three major non-life insurers, Tokio Marine & Nichido Fire Insurance (8766.T), Sompo Japan Insurance (8630.T) and Mitsui Sumitomo Insurance (8725.T), are limited to how much they can provide in maritime coverage without tapping into the European reinsurance market.
The EU will prohibit European insurers and reinsurers from indemnifying tankers carrying Iranian crude oil anywhere in the world from July, threatening to curtail shipments and raise costs for major buyers. Japan and South Korea have lobbied for exemptions, but insurance and shipping executives say a complete ban now looks likely.
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The three insurers together can only provide up to 30 billion yen ($370 million) at one time in hull and machinery cover, which protects vessels against physical damage, without relying on the European reinsurance market to hedge their risk.
That was enough to cover insurance for only one tanker travelling inside the Gulf with Iranian crude oil, the industry sources said.
“The Japanese buyers who load Iran crude need to share information about schedules for loading. They haven’t done so previously,” said an industry source familiar with the matter.
The insurers will only be able to cover three or four tankers of Iranian crude oil a month since each ship takes about a week to 10 days to travel in and out of the Middle East Gulf, sources said.
That translates to 6 to 8 million barrels per month, or about 200,000 to 267,000 barrels per day, but the volumes are likely to be lower than that because Japanese buyers typically do not fully load the tankers, the sources added.
The Japan P&I club, the country’s main ship insurer against pollution and personal injury claims, has also been forced to reduce its cover for a tanker carrying Iranian oil to $8 million from July 1 from the current $1 billion due to EU sanctions. ($1 = 80.9950 Japanese yen)
Editing by Randy Fabi and Himani Sarkar