Sanctions-hit Indian shipping firms will continue transporting Iranian crude oil, even if restricted insurance coverage leaves them financially exposed in the case of a spill or accident, industry sources have said.
According to Reuters, Shipping Corp of India, Great Eastern and other Indian tanker firms have asked state insurers to step in and provide up to $50m in third-party liability cover per tanker voyage.
The amount is a fraction of the typical $1bn cover that a supertanker would have from reinsurers against personal injury and pollution claims.
If India's shipping companies take the risk of shipping the crude, they will be liable for any claims above $50m in the case of an incident, industry sources said.
But speaking to Reuters at an industry conference in Singapore, Shipping Corp chairman S. Hajara said that the shipping companies felt it was a risk worth taking.
"To the best of our knowledge, over the last 10 years, none of the Indian shipping companies carrying Iranian crude oil into India has had any major incident relating to pollution or anything," he said.
"Since there have been no claims in 10 years, we felt if we have cover of $50 million as a commercial organisation it would be worthwhile for us to continue in that business."
A major oil spill from one of these tankers could leave Indian ship owners liable for billions of dollars in damages.
The shipping firms have sent their request to state insurers United India Insurance, General Insurance Company, New India Assurance Co. Ltd, National Insurance Co and the Oriental Insurance Co Ltd, said a shipping source. The shipping and finance ministries were also looking at the proposal.
Hajara told Reuters a final decision was expected "very soon".
Updating your subscription status
What is the claims environment like in Asia? What are insurers doing to manage increasing claims costs and is there sufficient expertise in the market to handle future claims?
Designing a multinational insurance programme is a complex undertaking. However, the right strategy and tools help optimise performance and boost bottom-line results. This Aon Benfield article addresses the key challenges to overcome, including cultural issues, regulations, business process management and risk.
Country Profiles provides individual summaries for Lloyd's key territories. These profiles contain factsheets on the economy, insurance market and Lloyd's business. This analyst report from September 2012 focuses on Singapore.