Tankers using Japan’s shipping- insurance association to purchase coverage for Iranian crude cargoes will be liable for any costs not recovered through reinsurance due to sanctions against Iran.
The Japan Ship Owners’ Mutual P&I Association said in a letter on its website that shippers buying liability insurance for Iranian crude after European Union sanctions take effect in July must agree in writing to pay for damages or other charges that the association’s Europe-based reinsurers are unable cover.
The rules stipulated in the April 10 letter are in response to last month’s implementation of an EU ban on coverage for vessels using Iran’s ports. The EU agreed to the ban, which applies to its 27 member states, in January as part of an effort to stem Iran’s nuclear program.
While the ban doesn’t apply directly to Japan’s P&I Association, the insurer is a member of the International Group of P&I Clubs. Its participants reinsure each other for claims in excess of $8 million, according to the letter. The London-based club has 13 members, some of whom are regulated by the EU.
“This will impact the member’s ability to make a recovery from the club, as the club is not able to pay out any claim in relation to which it can make no recovery from reinsurers,” the letter said. “Because of this, the member could suffer a significant shortfall in any claims made.”
The Japanese association’s new rules also require shippers to notify the association in advance when it embarks on a voyage that could be affected by sanctions. Association members include Mitsui O.S.K. Lines Ltd., Nippon Yusen K.K. (9101) and Kawasaki Kisen Kaisha Ltd. (9107)
Even after Japan’s crude imports from Iran fell 33 percent in February from a year earlier, the Persian Gulf nation remained Japan’s fourth-biggest supplier, according to data from the Ministry of Economy, Trade and Industry.
Yukio Edano, the country’s trade minister, said at a budget committee meeting last week that officials are seeking some flexibility from the EU as the July 1 start for sanctions approaches.
The Obama administration in the U.S. waived separate sanctions for 180 days on Japan and 10 European Union nations after they demonstrated cuts in Iranian oil purchases.
“The size of compensation for liability insurance, such as for an oil spill accident, are too big for Japanese insurers to go without reinsurance,” he said. “The trade ministry and the Ministry of Foreign Affairs are making efforts to win more understanding.”
Mitsui O.S.K. Lines (9104) Ltd. and Nippon Yusen, the world’s largest owners of supertankers, said they won’t ship Iranian crude without insurance.
“This is something that makes it very difficult for the shippers because they more or less run on their own risk,” Jurgen Sorgenfrei, director of HIS Global Insight’s maritime transport’s consulting business, said in an interview.
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