The US announced a $20 billion reinsurance programme to revive shipping in the Strait of Hormuz, where vessel crossings have come to a halt as the US and Israel's war on Iran continues.
The initiative from the US International Development Finance Corporation will cover war risk in the Gulf region, and will help to restore confidence in maritime trade and support international trade.
“We are confident that our reinsurance plan will get oil, gasoline, LNG, jet fuel and fertiliser through the Strait of Hormuz and flowing again to the world,” said DFC chief executive Ben Black.
The strait between Oman and Iran is the primary export route for oil produced by Saudi Arabia, the UAE, Kuwait, Qatar, Iraq, Bahrain and Iran, with exports averaging about 20 million bpd in 2025.
Shipping traffic through the channel came to a halt because of attacks by the Iranian navy. It remains open to traffic but ship owners are avoiding the channel as a precautionary measure.
The DFC reinsurance facility will insure losses up to about $20 billion on a “rolling basis” and will apply only to vessels for now, it said.
Insurance will focus on hull and machinery and cargo to start with. DFC also identified best-in-class, preferred American insurance partners for the initiative, according to the statement.
“DFC and Treasury are co-ordinating closely with Centcom on next steps in the implementation of this plan,” it said.
DFC, established in 2019, is the international investment arm of the US government. It partners with the private sector to advance US foreign policy and strengthen national security by mobilising private capital around the world.
DFC invests across strategic sectors including critical minerals, modern infrastructure and advanced technology.
Shipping companies welcomed the plan but said improvements in safety along the strait should be the highest priority.
“The US reinsurance support is certainly a positive signal to the market because it helps insurers and shipowners manage the financial risk,” Capt Farhad Patel, director of Dubai based Sharaf Shipping Agency, told The National.
However, he said insurance alone will not immediately restore traffic through the Strait of Hormuz and safety should be improved.
“Until there is clear stability and confidence that ships can transit without being targeted, many operators are likely to remain cautious despite the availability of coverage.”
The latest announcement comes after President Donald Trump, earlier this week, said he had ordered the US Development Finance Corporation to provide, at a very reasonable price, political risk insurance and guarantees for the financial security of all maritime trade, especially energy shipments travelling through the Gulf.
The US will also begin escorting tankers through the Strait of Hormuz if necessary, he added.
Shipping firm Hapag-Lloyd also introduced a War Risk Surcharge for transporting cargo to and from the Arabian Gulf this week.
The charges include a levy of $1,500 per 20-foot equivalent unit (TEU) for standard containers and $3,500 per container – for reefer containers and special equipment.
