As the European Union prepares to impose sanctions on Iran and breaks its trade agreement with the nation, the maritime insurance industry is facing a bleak and complicated future. Insurers will not be the only ones to suffer from the move, however, as countries that depend on oil from the Middle East will also feel the impact of the action. Even countries that do not rely on Iranian oil are claiming that the EU’s actions will have a major effect on their economies. Such is the case in India, where the government is looking to alternatives to continue conducting one of its most lucrative businesses.
India is the world’s third largest supplier of oil, just behind Saudi Arabia. The country makes approximately $11 billion a year on oil shipments, but most of its ships are insured by European companies, such as Lloyd’s of London. Indeed, European insurers hold dominance in the maritime insurance industry. When the EU sanctions are enacted in July of this year, these insurers will be banned from covering ships carrying Iranian oil.
India has been looking into the Asian insurance market for options, but has found few. Most Asian maritime insurers require reinsurance, which makes it unfeasible for shipping companies to hold policies and generate profits.
The sanctions are meant to isolate Iran and put an end to the country’s controversial nuclear project. They may, however, have unintended economic repercussions on the rest of the world, as transporting goods and resources via sea will become much more complicated than it had been in the past.
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