Flagship private shipping insurance group, the International P&I Club, has raised the default insurance coverage for tankers transporting Iranian oil to $580 million per ship from $80 million, the Japan P&I Club said on Tuesday.
The International P&I Club has been unable to extend normal liability coverage of $7.8 billion per ship to vessels transporting Iranian oil because the U.S. Treasury Department has left sanctions in place pertaining to insurance. That has prevented U.S. insurers from providing coverage.
The majority of Western sanctions were lifted against Iran in January.
To meet the shortfall in U.S. insurance coverage, the international P&I Club has created a “fall-back” of $500 million additional coverage per ship for Iranian oil at no extra cost to the members, the Japan P&I Club said in a statement.
Although $580 million coverage is still less than 10 percent of the normal liability coverage, Asian shippers such as China, India and South Korea and some shippers in Europe may find that enough to transport Iranian oil, an official with Japan P&I Club said on Tuesday.
Japanese shippers, however, are more risk-averse and may continue to use the government’s special sovereign shipping insurance to import Iranian oil until normal P&I coverage becomes available again, industry officials have said.
Tokyo stepped in to help its oil importers after Western sanctions imposed over Tehran’s disputed nuclear programme curbed the ability of private insurers to provide tanker cover.