The United States has introduced a $20 billion government-backed reinsurance facility for vessels transiting the Strait of Hormuz, entering a marine war-risk market where London insurers continue to provide cover despite sharply higher premiums.
The program was announced by the US International Development Finance Corporation, which said the facility will insure losses of up to $20bn “on a rolling basis.” Coverage will apply only to vessels “that meet the criteria,” though the agency did not disclose details describing eligibility.
The initiative was launched by DFC chief executive Ben Black and Scott Bessent following a directive from Donald Trump to create a political risk insurance and financial security mechanism aimed at keeping energy shipments moving through the waterway following US–Israeli strikes on Iran.
Trump also said the US Navy could escort tankers through the strait if required, although operational details have not been disclosed.
“DFC and Treasury are coordinating closely with CENTCOM on next steps in the implementation of this plan,” the agency said, referring to United States Central Command.
The DFC said it has identified “best-in-class, preferred American insurance partners.”
Insurance capacity for vessels operating in the region has continued to be provided through the commercial market, though premiums have increased following the conflict.
The Lloyd’s Market Association said after discussions with US government representatives that it welcomed the DFC plan to “support the movement of non-sanctioned vessels and their commodities through the Strait of Hormuz in order to facilitate global trade and economic stability.”
However, the association noted that coverage through the London market remains active.
“It is important to note that the vast majority of these vessels are insured in the London market and for those vessels, insurance currently remains in place,” the LMA said.
Market discussions between Lloyd’s participants and US officials are taking place regarding political risk insurance and financial guarantees tied to the DFC plan, according to reporting published by insurance industry outlets.
Approximately 1,000 vessels remain in the Persian and Arabian Gulf and surrounding waters with an aggregate hull value exceeding $25bn, according to LMA data. Roughly half of those ships are oil and gas tankers.
Marine insurers have also widened the geographic area designated as high risk in the Gulf following the escalation of regional conflict, which typically triggers higher war-risk premiums and additional underwriting review.
Disruptions to tanker movements through the strait have already affected global energy flows.
Reporting by Reuters indicates that oil production from southern Iraqi fields has dropped by about 70%, with output falling to 1.3 million barrels per day from 4.3 million barrels per day before the conflict. Iraq’s crude exports have declined from more than 3.33 million barrels per day to about 800,000 barrels per day.
Only two vessels loaded crude at Iraq’s southern terminals during one recent day of operations.
In normal conditions, roughly 135 vessels pass through the Strait of Hormuz each day, carrying about 19 million barrels of oil and around 10 billion cubic feet of liquefied natural gas, according to data cited by S&P Global Commodities at Sea.
Since the conflict began, more than 10 vessels have been targeted in the strait and nearby waters, according to market reporting.
Brent crude rose above $92 per barrel on Friday, its highest level since the conflict began.
US officials have also discussed additional measures affecting global oil supply.
Bessent said the United States may lift sanctions on additional Russian oil shipments after the Treasury Department allowed refiners in India to purchase Russian crude that was already on the water.
“Treasury agreed to let our allies in India start buying Russian oil that was already on the water,” Bessent said in an interview with Fox Business. “To ease the temporary gap of oil around the world, we have given them permission to accept the Russian oil. We may unsanction other Russian oil.”
Bessent said there are “hundreds of millions of sanctioned barrels” of crude currently at sea.
“In essence, by unsanctioning them, treasury can create supply,” he said.
Insurance specialists have noted that marine war-risk insurers continue to explore ways to support shipping activity in the region even with heightened security risks.
Industry analysts told S&P Global that insurance availability alone may not restore shipping volumes quickly, since security threats to vessels remain the primary concern for shipowners and crews.
Shipowners and insurers continue to assess risk exposure in Gulf waters while monitoring security conditions affecting one of the world’s most significant energy shipping corridors.
