India’s ship owners have sought higher limit on Hull and Machinery Cover of up to $ 100 million for ships bringing crude oil from Iran after an insurance ban by European Union from first July 2012 prevented local insurers from extending this cover.
State-run general insurers have agreed to extend Hull and Machinery Cover up to $ 50 million to Indian ships carrying crude from Iran. But ship owners have told the insurers that the $ 50 million cover is inadequate at least for the oil super tankers and hence, asked for a higher cover of up to $ 100 million.
However, as per United India Insurance they can’t offer higher cover due to lack of reinsurance facility from European insurers. And this is the only limit they can extend, based on their own strength, without any re-insurance. They also said that ships approaching within the limit of $ 50 million range can take the cover to ship crude from Iran.
Indian ships will not have Hull and Machinery Cover if they carry the Iranian crude. This is because the cover is partly reinsured with European insurers. Europe has banned the purchase, transport, finance and insurance of Iranian crude from first July.
In July Insurance Regulatory and Development Authority (IRDA) has allowed state-owned United India Insurance Company to provide a third party liability cover of $ 50 million per shipment for Indian ships carrying Iranian crude.
However, most of the ship owners said that scope of the cover was inadequate compared with what the London based International Group of Protection and Indemnity Clubs (IG-Clubs) offered.
IG-Clubs, a thirteen member group, insures 95% of the world’s tankers, placing a $ 1 billion limit on individual claims involving pollution damage and wreck removal. Following European sanctions, IG Clubs have stopped offering third party liability covers to ships carrying Iranian crude.
Ship owners say not only quantum of cover is inadequate but quality of the cover is also important. Ship owners are seeking like-to-like cover which is similar to the cover offered by IG Clubs.
The third-party liability cover is separate from the insurance for the ships Hull and Machinery.