Japan insurers to cut Iran oil insurance coverage

TOKYO (Reuters)—Japanese nonlife insurers are in talks with Japanese buyers of Iranian oil to slash cargo insurance coverage for transporting Iranian crude reflecting the European Union's move to prohibit European insurers from providing reinsurance, industry sources said on Wednesday.

A ban on European insurance cover for Iranian oil exports from July 1 is threatening to curtail shipments and raise costs for major buyers. Japan and South Korea have lobbied for exemptions, but insurance and shipping executives say a complete ban now looks likely.

Tokio Marine & Nichido Fire Insurance, Sompo Japan Insurance and Mitsui Sumitomo Insurance are among those that have approached Japanese oil refiners to cut coverage for Iranian oil and petrochemical shipments by more than 50%, the Nikkei business daily said on Wednesday.

A source with a Japanese buyer of Iran crude said it has been approached by at least two of those insurers regarding the cut, but added it was not yet in talks to discuss the details of what the cuts might be.

"We like to settle the issue by the end of the month or early next month," the source said on condition of anonymity. "It will have an impact (on procurement of Iran oil), but it's hard to say now to what extent that might be because the issue is complex."

The major insurers are also aiming to add waivers for war risk insurance and hull cover, which protects vessels against physical damage, to stop insuring while carrying Iranian oil, the source added.

International sanctions are making it tough for refiners to find shippers for the oil, insurers to underwrite the trade, and banks to clear payments for Iran's principal export.

The European Union partly exempted some insurers from its embargo on the Iranian oil trade until the start of July and next month E.U. ministers plan to review whether to extend these waivers.