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How Iranian oil link could complicate insurance claims after tankers clash off Singapore

An accident between 2 tankers off Singapore in July raises questions over insurance coverage claims, as one of the vessels formerly delivered Iranian oil, possibly complicating payments due to Western sanctions, shiptrackers and industry sources state.

WHAT HAPPENED?

The Singapore-flagged Hafnia Nile and the Sao Tome and Principe-flagged Ceres I clashed and caught fire about 55 km ( 35 miles) northeast of the Singaporean island of Pedra Branca on July 19.

No oil spill has actually been detected, only a sheen thought to be from damage to the Hafnia Nile's bunker tank, Malaysia's Marine Department said.

The vessel, which was bring a cargo of naphtha, suffered engine damage and was secured by tugs at the crash site.

On Thursday, ship supervisor Hafnia said that an oil boom has been released at the stern of the ship and around the damaged area, and 2 tugboats are distributing the light oil shine.

Hafnia stated it was dealing with Malaysian and Singaporean authorities to finalise a towage strategy.

WHAT'S THE IRANIAN OIL CONNECTION?

The Ceres I had no cargo at the time of the mishap.

Nevertheless, ship information from providers including LSEG and Kpler reveal the tanker brought Iranian crude in the past.

Ceres I last crammed Iranian oil by means of transfer with an Iranian tanker in March off the nation's Kharg terminal, consequently transferring the cargo to two tankers around the Malacca Strait in between April 7-9, said Claire Jungman, chief of personnel at advocacy group United Against Nuclear Iran, which tracks Iran-related tanker traffic through satellite information.

That cargo reached China on May 29, Jungman said.

Ceres I packed Iranian oil at least 4 times considering that 2019, transferring 8 million barrels, according to analysis by Jungman. The vessel also made four journeys carrying Venezuelan oil in between 2021 and 2023 amounting to 7.5 million barrels, she stated.

The China-based owner of the Ceres I noted in shipping databases could not be grabbed comment.

China, the biggest purchaser of Iranian crude, says it opposes unilateral sanctions, but traders rebrand Iranian oil predestined for the country as stemming somewhere else, such as Malaysia, Oman or the United Arab Emirates, tanker trackers and traders state. Chinese customs have actually not reported any imports of Iranian oil because June 2022.

WHAT IS UNIQUE ABOUT THIS SITUATION?

This is thought to be the very first such collision in current years including a vessel that is part of the so-called shadow fleet of tankers transferring oil cargoes that are subject to Western sanctions, insurance professionals stated. Federal government and market authorities have raised issues over threats posed by the growing shadow fleet.

The current accident in between Hafnia Nile and Ceres I marks a dangerous precedent, said Jonathan Moss, head of transportation with law office DWF and an insurance coverage claims professional.

Neither vessel nor owners are designated (by Western sanctions), nevertheless, if the Ceres I was or had in the past been carrying Iranian crude, their insurance companies might have factor to decrease cover or may require to inform the authorities of a. possible sanctions breach, he said.

WHAT INSURANCE COVERAGE REMAINS IN LOCATION?

Ships typically have protection and indemnity (P&I). insurance coverage, which covers third-party liability claims consisting of. environmental damage and injury. Separate hull and equipment. policies cover vessels versus physical damage.

The Hafnia Nile is covered by Norwegian P&I insurer Gard,. one of the top 12 such companies covering around 90% of the. world's ocean-going ships.

Gard stated it was actively supporting its member BW Group,. which runs the Hafnia Nile, decreasing to provide specifics.

Normally, a P&I club that belongs to a worldwide group. of the 12 biggest business in the sector covers the first $10. million of P&I losses, with members mutually reinsuring each. other by sharing claims above $10 million to $100 million. The. group holds reinsurance conceal to $3.1 billion.

A person familiar with the matter stated the Ceres I has P&I. protection with a worldwide insurance company that is not amongst the. leading 12 suppliers, and hull and machinery coverage from a. Chinese insurer.

WHAT HAPPENS WITH DECLARES?

Claims in this case could include costs to fix both. vessels, pulling the Hafnia Nile to a dock, time in dock for. repairs and those sustained by the salvage business and pulls as. well as ship surveyors.

Generally, each celebration in a crash advises its own loss. assessor to prepare a report on what took place, establishing. liability and then notify its insurance companies and make a claim.

The claims process itself is typically handled by both. hull and P&I insurers and will last months if not longer.

Liability will be determined by a court, most likely in Asia.

Any claims sent to hull & & machinery, freight and P&I insurance companies. will be complicated by sanctions rules, DWF's Moss stated.

Moss stated if the hull & & machinery or P&I cover had actually been. positioned by insurance providers in the London market or other jurisdictions,. sanctions exclusion provisions could be set off. This could. avoid investigation of the claim including the consultation of. loss assessors, loss adjusters, fire experts and others,. possibly leaving the insured without cover from both direct. insurers or reinsurers, Moss included.

(source: Reuters)