Iran is offering to insure oil cargoes to India after some local insurers stopped providing the service in the face of impending U.S. sanctions, industry sources said, a move that would help Tehran continue supplying its second biggest oil client.


Tehran recently insured oil cargoes to India in tankers operated by National Iranian Tanker Company (NITC) as the threat of sanctions hits the supply of both ships and insurance for transportation, said the sources.


India’s top refiner Indian Oil Corp (IOC) and the second biggest state refiner Bharat Petroleum Corp have started lifting Iranian oil in NITC-owned vessels with the cargoes covered by Iranian insurance, sources said.


IOC, which planned to buy as much as 180,000 bpd of oil from Iran in 2018/2019, last week lifted oil in Very Large Crude Carrier Devon after United India Insurance refused to provide cover for the shipment, an industry source said.


Sources at New India Assurance (NIA),United India Insurance(UII) and GIC Re confirmed their companies have stopped providing insurance cover for Iranian cargoes.


“Indian general insurers have stopped giving any covers for Iran oil cargo after May 8 and no existing cover is valid beyond Nov 4,'' said industry sources. 


The source said IOC is seeking to buy August cargoes from Tehran on similar terms, with Iran responsible for the delivery to Indian ports.

State-run insurers rely on reinsurance from India’s GIC Re, which in turn depends on companies in both Europe and the U.S. to hedge its risk.

European and U.S. reinsurers dominate the global market and are increasingly wary of the risk of breaching sanctions.


“Right now the situation is very strict. (U.S. and European) reinsurers are not giving any cover for Iran related activities,” said a source at GIC.


The United States said in May it plans to re-impose some sanctions against Iran starting in August, with full sanctions in place by November, after withdrawing from a 2015 accord with Iran limiting its nuclear program.

India’s Hindustan Petroleum Corp (HPCL) canceled the purchase of an Iranian oil cargo earlier this month after its insurance company refused to provide coverage for the crude because of U.S. sanctions, three sources with knowledge of the matter said.

HPCL, India’s third-biggest state-owned refiner, renewed its installation insurance, which protects against any accidents at its refinery or storage sites, in early July. However, the new policy would not protect against any incidents involving Iranian oil processed or stored at its refineries, the sources said.

The refiner had planned to load 1 million barrels of Iranian crude onto the Suezmax tanker Ankaleshwar in early July but canceled the purchase after it was unable to sell it on to another buyer, said the sources who declined to be identified because of the sensitivity of the matter.

India is the second-biggest buyer of Iranian crude after China and without insurance coverage to protect their plants, the country’s refineries may have to cut off their imports earlier than anticipated.

“HPCL faced problems in lifting cargo from Iran because its annual insurance policy was renewed in July after the U.S. pulled out of the nuclear deal in May,” said one of the sources, adding the company will not be able to lift any Iranian oil.

HPCL’s Iranian imports account for only 20,000 barrels per day (bpd) of its full demand of 316,000 bpd but other Indian refiners that take larger volumes are likely to face the same problem if their annual policy is up for renewal before November.

Most refiners in Asia, Iran’s key market for oil sales, are gradually reducing the amount of oil they take from the OPEC member as they want to maintain access to the U.S. financial system when the sanctions kick in.

A third source said Tehran’s Bimeh Iran is providing insurance for oil cargoes while NITC has its third party liability insurance and pollution cover from the International Group of P&I Club.


Fears of losing insurance cover led to Hindustan Petroleum Corp cancelling its oil shipment in early July.


The U.S. in May withdrew from an international nuclear deal with Iran and said it would reimpose sanctions, some of which will take effect on Aug. 6 and the rest, notably in the petroleum sector, on Nov. 4.


Iran had hoped to sell more than 500,000 bpd of oil to India, its top client after China, during the current fiscal year that started in April, Oil Minister Bijan Zanganeh said in February.