The marine insurance market is playing a waiting game over the cost of the loss of Iranian oil tanker Sanchi with the deaths of its 32 crew.
The biggest issue for underwriters and salvage companies at present is the ongoing international dispute over which territorial waters the wreck of the vessel lies in.
As China and Japan continue to dispute which state has authority over the area, insurers are unsure about the scope and scale of the operations that must be carried out.
One leading marine broker told IHS Markit, “Sanchi will be a significant loss for the marine market. The problem at present is that with a significant amount of oil having been discharged into the sea, the way in which these spills need to be dealt with is still up in the air.
“China and Japan have different approaches to the handling of oil pollution, so the quicker there is an agreement on which state authority has responsibility, the quicker the market can put things into place.”
The fact that the tanker is Iranian-owned has also cast into doubt the ability of the market to pay the claims arising from the loss.
“While UK and European insurers are now able to offer insurance for Iranian risks, underwriters with any US interests or ownership are still banned from paying any claims,” explained the broker. “While early indications are that the lead underwriter on the risk is UK-based, if there are insurers with US links also on the policy they may well find themselves unable to pay the claims or be in breach of US sanctions, with the penalties for breaching those sanctions severe, both for the companies and their senior management.”
In terms of the protection and indemnity sector, the International Group of P&I Clubs recently renewed its huge reinsurance contract and in doing so removed US reinsurers from the programme to ensure they could offer cover for Iranian risks. Therefore, the likelihood is that the P&I claims for the loss of life, environmental impact, and removal of the wreck will be met.