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The compensation system for victims of oil tanker pollution will be “completely undermined” when European Union sanctions bar insurers from honouring some Iran-related claims made under valid certificates, the most senior international maritime insurer has warned.
Andrew Bardot, chief executive of the International Group of P&I Clubs, was speaking ahead of the start on July 1 of a ban on payment by EU-based insurers of any claims related to the shipment of oil or oil products across Iran’s borders.
A similar ban related to trade in petrochemical products starts on May 1.
Mr Bardot’s views reflect widespread concern among protection and indemnity (P&I) insurers about unforeseen consequences of the Iran sanctions, which explicitly cover insurance payments.
P&I clubs are mutually owned by shipowners and cover their third-party risks such as pollution.
About 95 per cent of the world’s ocean-going ships are reinsured by the London-based International Group and are consequently subject to sanctions.
The ban will extend to risks covered by the “blue card” system of certificates covering pollution by tankers.
On February 20 each year, insurers issue about 8,000 certificates valid for a year, guaranteeing to insure anyone affected by pollution damage from tankers, even if it results from someone else’s mistake.
P&I clubs could be barred from honouring claims for pollution incidents during voyages involving Iran covered by a valid blue card.
An executive at one P&I club, speaking on condition of anonymity, said the ban made life “less straightforward” for insurers.
“It means we have that difficult position of being caught in between an obligation under one system and an obligation under another one.”
Mr Bardot said confidence in the system would be so damaged that countries might demand extra pollution cover beyond the blue card before letting vessels trade.
“The system is based on the certainty of availability of compensation, which is guaranteed through the marine insurance system,” Mr Bardot said. “[Sanctions] will completely undermine the situation.”
However, the other executive suggested that the effects might be limited to delays in payment. The UK Treasury and other host governments would probably allow exemptions to sanctions for payments to those affected by pollution, he said.
“If there were some kind of environmental disaster off Singapore and there was a government making direct claims, probably the feeling would be that the Treasury would issue a licence,” the executive said.
The International Maritime Organisation, which sets the rules for international shipping, said it could not comment on the sanctions regime but that it was shipowners’ duty to maintain valid insurance.
The European Commission’s Transport Directorate had no immediate response.