First Published: 2004-04-28

Iraq attacks drive up oil tanker insurance costs

Some insurance firms have already doubled rates for some tankers shipping war-torn country's oil.


Middle East Online

By Perrine Faye - LONDON

The risk is now higher

Attempted suicide attacks on Iraq's southern oil terminals have raised fears about the risks to oil tankers servicing the war-torn country and prompted some insurers to double their rates on such vessels, experts say.

Iraq's oil exports were halted briefly on Saturday after three explosives-laden boats blew up as security forces prevented them from slamming into oil installations.

About 1.6 million barrels per day (bpd) are loaded through the offshore southern oil terminals, the bulk of Iraq's exports of up to 1.9 million bpd.

But operations were resumed on Sunday and oil tankers are expected to continue shipping Iraqi oil, considered vital for reconstruction efforts.

"There are minimal disruptions to the actual oil exports from Iraq, so tankers will still be going in as normal," said Anders Baardvik, executive officer at the International Association of Independent Tanker Owners (Intertanko), which represents some 230 tankers' owners.

"Of course, the risk in Iraq has been highlighted," he said, noting that insurance providers were raising their premiums on war risk cover.

One insurance firm, Talbot Underwriting, has already doubled its rates for some tankers shipping Iraqi crude.

"Generally speaking, an incident such as this one causes us to revisit what we are charging," said Rupert Atkin, director of underwriting at Talbot, a syndicate on the Lloyd's of London insurance market.

"We are now charging 0.5 percent of the value given to a tanker for Iraq, against 0.25 percent before the incident," though rates vary depending on the case, he said.

For a new tanker, with an estimated value of over 80 million dollars (67 million euros), that would equate to 400,000 dollars or more per trip.

Hiscox, another British specialist insurance company, has also raised its rates.

"Undoubtedly, not only Hiscox, but pretty much every insurer have raised their rates for ships going into Iraq since last weekend... Because of the perceived risk of what seems to have been a fairly close call," said Brandon Flood, a marine underwriter at the insurer.

"But there hasn't been a broad brush (approach), so the rate increase does not concern the whole of the Arabian Gulf; it is limited to Iraq and possibly Kuwait because of its geographical proximity."

Oil industry analysts also noted that insurance rates were still some way below those seen in the immediate aftermath of last year's US-led war to topple Saddam Hussein.

"Some underwriters have doubled their rates from 0.25 percent to 0.5 percent of hull value though they are still a long way below the peak rates of 3.5 percent immediately after the Iraq war," said Barclays Capital analyst Kevin Norrish.

"The attacks are certain to raise insurance costs for oil tankers in the region and shipping companies are likely to press for more security in the area as well," he added.


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