It is essential to reassure port authorities that should a vessel run aground, collide with another ship, or become involved in an oil spill or other serious incident, that insurance cover is in place to pay for damage to ships, ports or the environment.
The enormous costs associated with the Deep Horizon spill in the Gulf of Mexico of between $2 billion and $5 billion, or the still evolving Fukushima disaster in Japan, have driven home the potential cost of nightmarish accidents. The Exxon Valdez showed litigation and reparations could take decades to resolve.
IRISL’s P&I cover was withdrawn by Lloyds of London in 2009 following UK sanctions against the shipping line. IRISL then found cover from a P&I provider operating out of Bermuda. In 2010, Bermuda passed legislation, bringing the country in line with the UK.Enjoying this article? Click here to subscribe for full access. Just $5 a month.
‘EU regulations have resulted in cover being terminated or not renewed for a number of designated Iranian shipping companies including IRISL and the NITC (National Iranian Tanker Company),’ Bardot says.
IRISL then approached the Islamic P&I club, which refused to provide cover.
Finally, IRISL secured P&I cover from Moallem, an Iranian insurer with no record of providing this type of insurance. NITC was faced with a similar issue with regards to P&I cover and has publicly stated it is using an ‘Asian P&I provider’ with cover that’s reliable, but more expensive than that secured through London. However, the lack of transparency on the identity of the provider does nothing to reassure on the reliability of the cover. Either way, on December 21, the US Treasury sanctioned Moallem.
All P&I providers re-insure against catastrophic losses, which kicks in for large exposures, but it isn’t clear who Moallem uses for re-insurance. Major European insurance houses wouldn’t be in a legal position to offer cover, leaving the Peoples Insurance Company of China (PICC) being touted as a possibility.
But analysts say that given its ongoing negotiations over access to Lloyds of London, it was highly unlikely that PICC would risk its international standing by being associated with a controversial and sanctioned client like IRISL.
Within maritime circles, the presumption is the Iranian government is the reinsurer of Moallem. But analysts say that given the doubts over Moallem and the severe restrictions on the Iranian government, banks and other institutions, the key question is how IRISL and Tehran would react to a shipping and environmental calamity, and what options would be open for redress and compensation.
It’s an issue that Greenpeace says must be addressed by the 10-nation Association of South East Asian Nations (ASEAN) given the threats to livelihoods and food security – and it says that any legal loopholes should be closed, while uninsured ships should be barred from entering regional ports.
Keith Loveard, a regional security analyst with Jakarta-based Concord Consulting, says an Iranian shipping disaster off the coast of Indonesia would likely cause a rift within government, as was seen with the leak from a Thai rig off the northern Australian coast last year.
‘The government would be caught between different currents, with the Foreign Ministry attempting to maintain smooth relations, while the Environment Ministry would be hopping mad and local communities would be left to deal with the mess,’ he says. ‘This is all very hypothetical. But the longer rogue ships operate without any insurance cover, the likelihood of something going wrong obviously increases.’