Blue Economy
Washington Deploys $20bn Insurance Shield to Unblock Persian Gulf Shipping Crisis
Washington Deploys $20bn Insurance Shield to Unblock Persian Gulf Shipping Crisis
By Okeoghene Onoriobe, Waterways News Correspondent, Lagos
The United States government has launched a $20 billion maritime reinsurance scheme designed to breathe life back into commercial shipping through the Strait of Hormuz, after a wave of security threats brought vessel traffic through one of the world’s most critical waterways to a near-standstill.
The facility, announced by the U.S. International Development Finance Corporation in partnership with the United States Department of the Treasury, will provide insurance coverage — including war-risk protection — for ships operating in the Persian Gulf as tensions with Iran continue to mount.
Under the arrangement, losses of up to $20 billion will be covered on a rolling basis, with initial focus on hull and machinery insurance as well as cargo protection.
The move follows a direct order from U.S. President Donald Trump, who directed the federal government to provide political risk insurance and financial guarantees for maritime trade in the Gulf after private insurers rapidly retreated from the market in the wake of a series of attacks on commercial vessels.
Ben Black, Chief Executive Officer of the development finance agency, said the programme was aimed squarely at restoring the flow of critical energy supplies through one of shipping’s most vital chokepoints.
“Working alongside United States Central Command, the coverage will provide a level of security that no other policy can offer,” Black said. “We are confident that the reinsurance programme will help ensure that oil, gasoline, liquefied natural gas, jet fuel and fertiliser can safely transit the Strait of Hormuz and continue flowing to global markets.”
The reference to U.S. Central Command — the military arm responsible for operations across the Middle East — has drawn attention from analysts, who say it signals that armed escort or security support could accompany the insurance framework. President Trump has also floated the possibility of deploying the U.S. Navy to escort tankers through the strait if conditions deteriorate further.
Coverage under the scheme will be limited to vessels meeting specific eligibility criteria, though detailed requirements are yet to be published. The insurance will be underwritten through selected American insurance partners working within the federal programme.
The announcement is being described as one of the most significant government interventions in global maritime insurance markets in recent memory. It comes as the threat level for maritime operations in the region was raised to “critical” by the Joint Maritime Information Center.
Members of the International Group of P&I Clubs — which together insure roughly 90 per cent of the world’s ocean-going tonnage — have issued 72-hour cancellation notices on certain war-risk coverages tied to Iranian waters and surrounding Gulf areas, after reinsurers withdrew capacity. While war-risk insurance remains available on a voyage-by-voyage basis, the tightening market has become a decisive factor in shipowners’ operational calculus.
The scale of the disruption has been stark. Industry estimates suggest close to 1,000 vessels are currently anchored or drifting in holding patterns across the Persian Gulf and surrounding waters as operators weigh security risks, insurance costs and contractual exposure. Traffic through the Strait of Hormuz — through which a significant share of the world’s seaborne energy supplies passes — has reportedly fallen by around 90 per cent from its historical average of approximately 138 daily transits.
By establishing a federal backstop, Washington hopes to remove one of the central barriers preventing a resumption of normal shipping operations in the region. However, analysts caution that the programme’s effectiveness will hinge on how swiftly coverage can be activated and whether shipowners judge the combined security-and-insurance package sufficient to warrant returning to the Gulf.
Further details of the scheme are expected as implementation gets underway. Businesses and financial institutions seeking access to the facility have been directed to contact the development finance agency directly.