Oil Tankers in Front Line of Libya’s Struggle; Insurance at Risk

By | January 27, 2015

Oil shippers face higher costs and the possible loss of insurance cover on Libyan voyages, caught in a struggle between the rival governments there and threatened by air attacks.

John Dalby of maritime security firm MRM, said he had prepared evacuation plans for an unnamed oil company if the situation deteriorated further, adding that attacks on tankers were expected to continue, reducing the pool of ships willing to make runs to and from Libya.

“We are likely to see more attrition between the rival governments and tankers are an easy target,” he said.

“This is expected to mean tanker owners will be even less keen on risking their tankers. Being targeted by air or sea is a real commercial and safety risk now.”

Libya’s recognized government, which has been driven out of the capital, is locked in escalating conflict with Libya Dawn, which has declared its own government.

In recent weeks, forces loyal to Prime Minister Abdullah al-Thinni have used warplanes to attack ships bringing fuel to their rivals and Western powers worry Libya is lurching closer to civil war.

The International Chamber of Shipping (ICS), which represents the majority of the world’s merchant fleet, said it took threats by Libya’s air force very seriously.

“(The ICS) advises merchant shipping to avoid Libyan waters if possible,” Secretary General Peter Hinchliffe said.

This week, the recognized government forced a tanker carrying fuel to divert course to Tobruk or face being bombed on after it tried make a delivery to Libya Dawn in Misrata – a port the rivals government controls.

This followed an attack by a Libyan warplane on a fishing vessel carry gasoline last week. In the worst incident this month, two crewmen were killed in an airstrike on a Greek-owned tanker moored off the port of Derna, drawing global condemnation.

The tanker’s Greek managers did not respond to requests for comment. Other tanker operators declined to comment citing security issues.

The turmoil is likely to raise insurance costs on shipments or even lead to Libya being excluded from policy cover, shipping sources say. Insurance for calls to Libya is typically given for seven days currently, they added. In 2011, Libya was added to high risk areas by London’s insurance market.

“War risks cover remains available, but we are maintaining a continuous watch on this complex situation where ships and their crews have been shown to be tragically exposed to unprovoked and unpredictable attacks,” a leading war risk insurer said.

The conflict could also mean contractual disputes ahead. “The stark warnings that military strikes will take place is likely to lead war risks insurers to alter policy terms relating to navigation to Libya,” said Jonathan Moss of law firm DWF.

“This will not only affect the balance of trade, but will also expose the assureds to uninsured liabilities and lead to a rise in coverage disputes should claims arise.”

(Editing by William Hardy)

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