Indian Insurance Coverage “Not Adequate” For Iranian Shipments

/Reinier Meuleman

MUMBAI–Two of India’s largest shipping companies which carry crude from Iran haven’t yet been able to find suitable insurance cover, a situation which could hurt the flow of oil from the sanctions-hit Middle Eastern country.

The Shipping Corp. of India Ltd. (523598.BY) — the country’s biggest marine transporter by fleet size — isn’t getting “adequate” insurance cover from local companies, Chairman Sabyasachi Hajara said.

“Our requirement and what has been offered by the insurers are yet to match…so nothing has happened as yet,” Mr. Hajara told Dow Jones Newswires late Tuesday.

He added that state-run Shipping Corp. won’t accept any of the inadequate proposals.

Mr. Hajara’s comments show that India is yet to make any headway in getting insurance for Iran shipments after Europe’s insurers withdrew all cover following the region’s sanctions against trade with Tehran.

The U.N. and some Western countries–including the U.S. — have barred global trade with Iran in an effort to persuade the country to abandon an alleged nuclear weapons program.

Iran insists its nuclear program is for peaceful purposes.

India, which has decreased but not stopped crude purchases from Iran, has been trying to make its own arrangements to bring in the oil.

Last month, state run insurer United India Insurance Co. Ltd. offered cover to Indian shippers, while General Insurance Corp. offered to reinsure.

Mr. Hajara had said then that the shipper may agree to the covers — about a hundredth of what Europe’s so-called Protection and Indemnity or P&I Clubs offer — but he now appears to have changed his mind.

The Indian insurer has offered $50 million for protection and indemnity — or third-party insurance — and an additional, similar amount for hull and machinery cover. But these are not enough, said Mr. Hajara.

“They had said they would look at increasing the cover for hull and machinery, but that hasn’t happened yet,” he said.

“Also, for P&I, they are offering $50 million per voyage, while we have asked for $50 million per incident… several incidents can happen in one voyage,” he added.

Also, the insurers are yet to get approvals from ports on the India-Iran route, such as Fujairah in the United Arab Emirates.

Great Eastern Shipping Co. Ltd. (500620.BY), India’s other prominent crude shipper from Iran, has also not agreed to take local insurance covers.

Great Eastern Shipping spokeswoman Anjali Kumar, rejecting recent media reports which said the government is pressuring the company to carry Iran cargo, said: “We still haven’t agreed to the cover. Also, we haven’t received any letter from the government telling us to offer vessels for Iran cargo.

Anand Sharma, director at Mumbai-based consultant Mantrana Maritime Advisory Pvt. Ltd., said that the “situation has turned political now and the Indian government has to take more prominent measures if it wants its shipowners to ply shipments from Iran.”

“Also, apart from concerns about local insurers, Indian shipowners may be afraid to rub their clients from the West the wrong way by trading with Iran.”

The Indian government has, for the time being, allowed Iranian vessels to carry crude from the country, on requests from Indian oil companies.

By Anirban Chowdhury. (c) 2012 Dow Jones & Company, Inc.