NEW DELHI/SINGAPORE - Indian shipping firms will find it difficult to obtain replacement insurance coverage to continue importing Iranian crude oil after new European Union sanctions come into effect, industry sources said.State-run Shipping Corp. of India, the largest tanker owner in India, will lose its EU insurance coverage for its oil tankers operating in Iran from July 1, when European insurers will be prohibited from indemnifying ships carrying Iranian oil.Iran, the world's fifth-largest oil exporter is struggling to retain its top consumers as stricter sanctions and an embargo make it impossible to trade with the Islamic Republic.Iran will export a six-month low volume of fuel oil to East Asia in March due to sanctions and volumes will likely drop further as the EU embargo approaches.Fewer insurance optionsA.P. Moller-Maersk, Singapore-based Samco Shipholding, and many other international maritime firms have halted new deals with Iran, leaving Asian oil importers to rely more on domestic and state-run firms to handle the OPEC member's shipments.All but one of the international P&I clubs, which together cover 95 percent of the world's tankers against pollution and personal injury claims, are covered by the sanctions since they are based in the European Union or the United States.That leaves India firms with only a few options -- Japan's P&I club, insurers in China, Russia and the Middle East, or Singapore and Hong Kong."We continue to provide insurance to oil tankers. It does not matter whether the ships call at Iran," said an official with Japan P&I club, which mainly provides coverage to domestic shipowners and represents around 7 percent of global P&I coverage. The club has received recent inquirers from South Korea and Taiwanese shipowners.Switching to the Japan P&I club could take months as members have to weigh the risk of a potential new entrant, especially one that wants to do business with Iran, maritime lawyers said.And Iranian insurance coverage is not an option as sanctions against the country's financial system make it impossible to collect payment should there be a claim, said Jim James, a Hong Kong-based lawyer with legal firm Norton Rose.The most likely alternative is China, which has a big enough market to provide the necessary re-insurance coverage to insurers looking to share the risk."The China market is slightly different. You have some extremely large insurers that may decide it is a good business and China is not subject to that regime," said Iain Anderson, a Singapore-based lawyer with Ince & Co.As fewer insurers are able to offer cover, rates could go up significantly for tankers carrying Iranian crude, said Karam Jo, assistant manager for marine underwriting at Korean Re.Singapore and Hong Kong insurers also could be options, but many of them have links to the West."It will also be very difficult for an Asian market insurer. They too have to be comfortable that their footprint around the globe keeps them outside the current sanctions regime," Anderson said.Indian maritime firms are likely to be the most affected in Asia by the sanctions as the other two biggest buyers China and Japan do not rely on European insurers but are covered by domestic providers. India, China and Japan are Iran's three biggest crude oil buyers."We are covered by P&I clubs in the EU," Sunil Thapar, director at Shipping Corp of India told Reuters, referring to the groups of customer-owned maritime protection and indemnity insurance groups."These clubs will not be able to give us coverage for vessels to Iran from July. It will be difficult for Indian shipping lines to transport Iranian crude unless alternative arrangements are made." SCI owns 39 oil tankers.Europe and the United States are implementing tougher sanctions in the hope that isolating Iran will force Tehran to halt its atomic program, which the West fears will be used to develop nuclear weapons.Iran, the biggest producer in OPEC after Saudi Arabia, denies Western suspicions that its program has military goals, saying it is for purely peaceful purposes.