A reinsurance deal that paves the way for a resumption of trade with Iran has been agreed by the protection and indemnity clubs.
They are to buy EUR 70m ($79m) of cover that partially fills a gap in their protection arising from ongoing primary sanctions affecting US reinsurers.
The replacement reinsurance has only to replace the cover where US reinsurers would default so is sufficient to mean that the 13 International Group clubs can offer $500m of cover for Iran related claims.
This could be for either a single large loss or a combination of smaller losses.
The P&I clubs are telling members that the replacement reinsurance will respond to both guaranteed cover under 'blue cards' issued for liabilities arising from international conventions and general P&I risks.
There is however only a single full reinstatement, unlike the non-sanctioned reinsurance cover, where there is an unlimited reinstatement potential.
Reinstatement is the replacement of 'burnt' cover usually by payment of a further full reinsurance premium.
But a single reinstatement means the capacity to handle a run of smaller Iran related claims is significantly enhanced.
The replacement cover is written by non-US reinsurers and follows the International Group being advised that provision of such cover would not amount to an unlawful or deliberate circumvention of US primary sanctions.
Reinsurance broker, Miller Insurance Services, is continuing to investigate further capacity to increase both the cover limit and number of reinstatements.
The special cover against the risk of a US reinsurer defaulting is seen as a temporary solution with the clubs aiming to have a permanent resolution of the Iran cover issue by 2017 at the latest.
