Tokyo (Platts)--22Feb2013/649 am EST/1149 GMT

Japan is expected to increase its maximum insurance cover for tankers carrying Iranian crude by 4% year on year to Yen 635.9 billion, or $7.8 billion under exchange rates used in the budget in the fiscal year 2013-2014, sources familiar with the matter told Platts Friday.

The anticipated hike in the insurance, set to come into effect on April 1, follows a decision by the International Group of P&I Clubs to increase its maximum reinsurance cover in its 2013-14 fiscal year, which started Thursday, the sources said.

An official at the Ministry of Land Infrastructure, Transport and Tourism declined to comment as the ministry is still in the process of finalizing its budget for the upcoming fiscal year.

The International Group has now hiked its maximum reinsurance cover to $7.67 billion for eventualities ranging from an oil spill to wreck removals and fishery claims, the sources said.

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That increase is due to a 5% year-on-year increase in its members' gross tonnage to 962 million mt coupled with around a 30% rise in reinsurance costs shared by its members, the sources said.

On Thursday, the Japan Ship Owners' Mutual Protection and Indemnity Association, known as the Japan P&I Club, also hiked its maximum reinsurance cover to $9 million for its 2013-2014 fiscal year, up 13% from $8 million in the previous fiscal year, the sources said.

Last year, Japan's crude imports from Iran were only made possible by the introduction at the end of June of a new supplementary insurance framework set up by the Japanese government to get around the EU ban on protection and indemnity cover for tankers carrying Iranian oil on July 1.

Japan's crude imports from Iran in 2012 plunged by 39.5% from 2011 to 11 million kiloliters, or an average 189,000 b/d, as Western sanctions on Tehran over its nuclear program bit deeply into oil trade with Tokyo.

The 2012 volume was 114,480 b/d lower than the 303,480 b/d imported in 2011. It was also the lowest since 1988, when Japan imported 10.97 million kl.

The Japanese cabinet is expected to approve a budget on the Iran oil shipping insurance after the transport ministry finalizes its budget for the upcoming fiscal year.

--Takeo Kumagai, takeo_kumagai@platts.com
--Edited by Alisdair Bowles, alisdair_bowles@platts.com

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