Iran offers India insurance to continue oil supply as US sanctions loom

State-run insurers used to provide cover before. They relied on reinsurance from India's GIC, which in turn depends on companies in both Europe and the US to hedge its risk

Iran is offering to insure oil cargoes to India after some local insurers stopped providing the service in the face of impending US sanctions, industry sources said, a move that would help Tehran continue supplying its second-biggest oil client.

Most refiners in Asia, Iran's key market for oil sales, are gradually reducing the amount of oil they take from the OPEC member as they want to maintain access to the US financial system when the sanctions kick in.

Tehran recently insured oil cargoes to India in tankers operated by National Iranian Tanker Company (NITC) as the threat of sanctions hits the supply of both ships and insurance for transportation, said the sources.

India's top refiner Indian Oil Corp (IOC) and the second biggest state refiner Bharat Petroleum Corp have started lifting Iranian oil in NITC-owned vessels with the cargoes covered by Iranian insurance, sources said.

IOC, which planned to buy as much as 180,000 bpd of oil from Iran in 2018/2019, last week lifted oil in Very Large Crude Carrier Devon after United India Insurance refused to provide cover for the shipment, an industry source said.

The source said IOC is seeking to buy August cargoes from Tehran on similar terms, with Iran responsible for the delivery to Indian ports.

A source at United India Insurance confirmed the company has stopped providing insurance cover for Iranian cargoes.

State-run insurers rely on reinsurance from India's General Insurance Co (GIC), which in turn depends on companies in both Europe and the US to hedge its risk.

European and US reinsurers dominate the global market and are increasingly wary of the risk of breaching sanctions.

"Right now the situation is very strict. (US and European) reinsurers are not giving any cover for Iran related activities," said a source at GIC.

United India Insurance did not respond to Reuters' telephone calls seeking comment. IOC, BPCL and GIC did not respond to Reuters emails seeking comments.

A third source said Tehran's Bimeh Iran is providing insurance for oil cargoes while NITC has its third party liability insurance and pollution cover from the International Group of P&I Club.

Fears of losing insurance cover led to Hindustan Petroleum Corp cancelling its oil shipment in early July.

The US in May withdrew from an international nuclear deal with Iran and said it would reimpose sanctions, some of which will take effect on Aug. 6 and the rest, notably in the petroleum sector, on Nov. 4.

Iran had hoped to sell more than 500,000 bpd of oil to India, its top client after China, during the current fiscal year that started in April, Oil Minister Bijan Zanganeh said in February.