Kathmandu. The Lloyd’s Market Association has announced that it will cancel insurance for ships that pay traffic fees to Iran on the Strait of Hormuz. For this, the association has put forward a new condition. According to this condition, insurance coverage of ships that pay sea hull underwriters to transit on the Strait of Hormuz can be canceled.
The conditions, issued in late July, respond to growing concerns that shipowners could pay fees or other compensation to Iranian authorities for transiting this vital waterway. Under this condition, which is called the Hormuz Strait Transit Fee Condition, insurance companies will refuse to refund any transit fees, tolls or similar charges.
More importantly, once such payment is made, the cover for that particular vessel automatically expires. According to the association, this step is necessary. Because any such transaction could put the US, UK or the European Union at risk of sanctions or terrorism law violations.
This condition covers both financial payments and non-financial gains and may also apply when money or goods are sent through intermediaries. The insurance cover ends at the moment such payment is made. This condition only affects the attached ship and does not automatically cancel insurance for the remainder of the owner’s fleet.
Under the United Nations Convention on the Law of the Sea, exceptions are made for fees paid in exchange for legitimate maritime or navigational services that comply with the terms of consent already in law and policy. This condition is optional rather than mandatory. So individual underwriters, insurance brokers and insurers are free to accept, reject or change it.
Arabella Ramage, the association’s director of legal and regulatory affairs, described the terms as providing a clear compromise position for both parties in a difficult legal environment. According to trade insurance reporting, the association developed the language as Iranian officials were exploring a formal toll system for Hormuz, one of the world’s most important shipping routes for oil and other cargo.
The move gives the London market a practical tool to manage the impact of sanctions. Meanwhile, tensions in the Middle East are raising war risk premiums and making marine insurance placements difficult. –Agency
