According to recent reports, Japan’s maximum coverage for tankers carrying crude from Iran is expected to rise.
According to sources quoted in several oil insurance news reports, Japan is preparing to raise the maximum cover for tankers transporting crude from Iran within the 2015-2016 fiscal year (April-March).
This is the result of an increase put into place by the International Group of P&I Clubs, among other factors.
The weakening of the Japanese yen, in comparison with the American dollar has also had an effect on the oil insurance protection and has helped to drive the expected increases. The anticipated raise in the maximum oil coverage will become effective as of April 1 and will arrive on the heels of a decision made by the International Group of P&I Clubs to boost its own maximum reinsurance coverage by an annual 2.5 percent within the 2015-2016 fiscal year.
So far, no official confirmation of the changes to the Iranian oil insurance cover have been made.
At the time of the writing of this article, a Japanese Ministry of Land Infrastructure, Transport and Tourism official had declined to comment on the insurance coverage for the transportation of Iranian crude oil, as the finalization of the budget for the 2015-2016 fiscal year had not yet been set.
That said, within the current fiscal year, which will come to a close on March 31, the government of Japan is providing as much as ¥764.4 billion (around $7.88 billion) per very large crude container (VLCC) carrying oil from Iran under a government insurance program.
The International Group has increased its own maximum cover with reinsurance of $8.1 billion in the upcoming fiscal year. The current fiscal year had been operating with a maximum reinsurance cover of $7.9 billion, which would provide protection from perils ranging from fishery claims to wreck removal and oil spills.
According to sources quoted in several reports, the increase is because of a year on year increase of 3.8 percent in the gross tonnage of its members, bringing it to 1.047 billion mt from having previously been 1.009 billion mt. With such an increase also comes a need for greater oil insurance cover.