China's P&I club halts cover over Iran sanctions

A major Chinese ship insurer will halt indemnity cover for tankers carrying Iranian oil from July, dealing a blow that narrows the insurance options for Tehran's main export already constricted by payment barriers caused by Western sanctions.

Sources at the China P&I Club told Reuters on Thursday that it did not want to stand alone in the market, especially after insurers in Japan and Europe plan to limit or ban their own coverage for tankers operating in Iran.

The China P&I Club, members of which include major Chinese shipping firms Sinotrans and COSCO Group, is the first Chinese maritime insurer to confirm that it will halt business with tankers operating in Iran.

"Many ship owners want to join our club and want our club to cover this risk, but considering all these regulations from the US and the EU, I know the China P&I club will not do that," a Hong Kong-based official with the insurer, who wished not to be named because he was not authorised to speak to the media, told Reuters.

"The China P&I club will not take the risk. We have asked our members not to go there. If they go there, they take their own risk."

Starting in July, European insurers and reinsurers will be barred from indemnifying ships carrying Iranian crude and oil products anywhere in the world, in line with sanctions on Tehran.

Speaking to Reuters, a Beijing-based Chinese industry official underlined the shipping industry reliance on P&I clubs.

"I really don't know what will happen. We are talking about $1bn in coverage [per tanker]. No single insurance company can handle that," he said.

A manager from a Japanese firm commented: "It's now non-life [insurers] and shippers who can tell us how many cargoes we will be able to ship from Iran," adding that importing cargoes without insurance was unthinkable.