According to a recent Reuters article, Lloyd’s of London, the world’s largest insurance market, has said it will comply with sanctions signed into law by President Obama on July 1.

Lloyd’s of London will not insure or reinsure petroleum shipments going into Iran.  The Lloyd’s marine insurance market represents 15 to 20 percent of the total marine insurance industry.  The decision by Lloyd’s follows sanctions signed into law by President Obama focusing on Iran’s fuel imports and aiming to further isolate Iran in the international arena.  According to Reuters, Lloyd’s general counsel Sean McGovern said that “The US is an important market for Lloyd’s and, in recognition of this, the market will not insure or reinsure refined petroleum going into Iran….Lloyd’s will always comply with applicable sanctions.”

Although Iran is one of the world’s biggest exporters of crude oil, it has suffered from a lack of investment in its refineries and other petroleum-related infrastructure due to sanctions, “forcing the OPEC member to import some 40 percent of its gasoline needs,” according to Reuters.  Reuters further reported that Louise Nevill, head of marine hull at Talbot Underwriting, said Iran would find it tougher to get insurance cover. “A sanction, whether it’s US or UN, does not just affect Lloyd’s[,] it should affect all insurance providers,” she told Reuters. “It’s going to be a struggle [for Iran] and will probably end up having some sort of desired effect.”

J. Peter Pham, senior fellow at the National Committee on American Foreign Policy think tank, told Reuters that “Historically, Lloyd’s has been a leader and many will follow…. One has to consider the value of US and European markets versus the very limited Iranian market.”

Reuters further reported that “[t]he sanctions were also having an effect on the P&I Club market, which are marine insurers owned by shipping clients. Norwegian P&I Club Skuld said this week that US legislation was wide enough to expose insurers to the risk of sanctions, such as the blocking of dollar transactions and freezing of US assets. Skuld added that its board had been ‘invited as a matter of urgency’ to consider restrictions on cover for vessels involved in refined petroleum shipments to Iran to protect members’ interests.”