A proposed $20 billion US-backed reinsurance facility for shipping through the Strait of Hormuz is raising questions across the industry about government intervention in one of the world’s highest-risk insurance markets.
US Sen. Jeanne Shaheen, ranking member of the Senate Foreign Relations Committee, has asked the US International Development Finance Corporation to provide detailed information on the proposal, citing concerns over potential exposure of taxpayer funds and the possibility that benefits could extend to China.
In a letter to DFC CEO Benjamin Black, Shaheen questioned how the agency would structure and manage a facility designed to provide political risk reinsurance for vessels operating in a conflict-affected corridor.
“Restoring maritime trade disrupted by the war in Iran is critical to lowering energy costs for American families, but important questions remain about how this proposal may put US taxpayer dollars at risk,” wrote Ranking Member Shaheen. “We must also understand whether it will be the United States - or adversaries like China - that ultimately stand to benefit from this arrangement.”
The proposal follows a contraction in commercial war-risk insurance availability after hostilities involving Iran intensified in late February 2026. Several insurers issued cancellation notices effective March 1 for vessels transiting the Persian Gulf, Gulf of Oman, and Strait of Hormuz, while premiums increased sharply.
Oil and liquefied natural gas shipments through the corridor were disrupted, with tanker movements slowing or stopping and some vessels damaged or stranded. The waterway typically carries about 20% of global oil supply, placing pressure on energy flows when transit is interrupted.
In response, President Donald Trump directed the DFC, on March 3, to provide political risk insurance and guarantees for maritime trade in the Gulf. The agency followed with a March 6 announcement outlining a reinsurance facility covering losses of up to $20 billion on a rolling basis, and later confirmed the selection of a lead insurance partner.
The DFC’s plan involves a revolving reinsurance structure focused initially on hull and machinery and cargo risks. Coverage would apply only to vessels meeting eligibility criteria that have not yet been detailed.
The agency is coordinating with the US Treasury and US Central Command on implementation, with participation from American insurers including Chubb.
This structure introduces government-backed capacity into a segment of the marine insurance market where private underwriters have reduced exposure due to conflict-related loss potential.
Shaheen said the scale and timing of the initiative raise questions about whether the DFC can meet its statutory due diligence requirements, which typically involve extended evaluation of financial and development criteria.
“Using the DFC to prop up a risky market during a wartime crisis calls into question how the agency will adhere to its required due diligence procedures,” continued Ranking Member Shaheen. “Before moving forward, Congress and the American people deserve a full accounting of the potential exposure for taxpayers.”
She also pointed to the DFC’s financial capacity, noting that the agency has significantly less than $20 billion in its corporate capital account, creating uncertainty about how claims at that level would be addressed.
The DFC operates under the BUILD Act of 2018, which allows it to issue insurance and reinsurance backed by the full faith and credit of the United States. The agency’s total contingent liability limit is set at $250 billion through 2031, with commitments above $100 million requiring congressional notification.
The program represents a scale of coverage that exceeds the DFC’s typical political risk insurance limits, which generally reach up to $1 billion per project.
The proposal includes coordination with US Central Command, and President Trump has indicated that naval escorts could be deployed to support commercial shipping if necessary.
Shaheen questioned whether such measures would be sufficient to restore confidence among shipping companies and noted that military involvement could introduce additional risks to escorted vessels. She also cited the lack of defined costs tied to such operations.
External analysis cited in reporting indicates that continued escalation could limit the effectiveness of insurance support, particularly if attacks extend beyond the Gulf to other maritime routes.
Shaheen requested clarification on how vessels and cargo would qualify for coverage and how premiums would be determined relative to elevated risk levels.
She also asked whether the program could support shipments destined for China, which is the largest destination for oil transiting the Strait of Hormuz.
“If this proposal aims to support global energy flows, Beijing stands to be a primary beneficiary,” Ranking Member Shaheen added. “The American people deserve to know how the DFC will ensure that US taxpayer-backed support does not advantage China, Russia or Iran.”
The letter calls for safeguards to prevent indirect support to geopolitical competitors and for transparency on how beneficiaries are identified.
Shaheen said Congress established the DFC to address gaps tied to development and national security priorities and that the agency is required to assess transactions responsibly.
She called for continued consultation with the Senate Foreign Relations Committee and requested further detail before implementation, including a full accounting of risks, eligibility standards, and potential taxpayer exposure.
The proposal introduces a government-backed mechanism into a disrupted war-risk insurance market, with execution details, underwriting responsibilities, and financial exposure still under review.
