Japan is expected to increase its maximum insurance cover for tankers carrying Iranian crude in fiscal 2015-16 (April-March) due to an increase by the International Group of P&I Clubs and a weakening of the yen against the US dollar, sources familiar with the matter said Monday.
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The anticipated hike in the insurance, set to come into effect April 1, follows a decision by the International Group of P&I Clubs to increase its maximum reinsurance cover by 2.5% year on year in its 2015-16 fiscal year, which started Friday, the sources said.
An official at the Ministry of Land Infrastructure, Transport and Tourism declined to give Japan's insurance cover for carrying Iranian oil in the new fiscal year as its budget for the upcoming fiscal year is yet to be finalized.
In the current fiscal year ending March 31, the Japanese government is providing up to Yen 764.4 billion ($7.88 billion) per VLCC for carrying Iranian crude under a government insurance framework.
The International Group has hiked its maximum reinsurance cover to $8.1 billion for the new fiscal year, up from $7.9 billion, for eventualities ranging from an oil spill to wreck removal and fishery claims, the sources said.
That increase is due to a 3.8% year-on-year rise in its members' gross tonnage to 1.047 billion mt, up from 1.009 billion mt earlier, the sources said.
However, the Japan Ship Owners' Mutual Protection and Indemnity Association, known as the Japan P&I Club, has maintained its maximum reinsurance cover at $9 million for its 2015-16 fiscal year, the sources said.
In 2012, Japan's crude imports from Iran were made possible only by the introduction at the end of June of a new supplementary insurance framework set up by the Japanese government to get around the EU ban on protection and indemnity cover for tankers carrying Iranian oil from July 1 that year.
Japan imported an average 168,777 b/d of crude from Iran in 2014, down 4.9% from 177,414 b/d the previous year, according to data compiled by the country's Ministry of Economy, Trade and Industry.
Iran was the sixth largest crude supplier to Japan in 2014, accounting for 4.9% of its total imports.