Trump’s First Step to Protect Gulf Shipping: U.S. Introduces $20 Billion Maritime Reinsurance Tool
As the conflict in the Middle East escalates and shipping in the Strait of Hormuz comes to a near standstill, the Trump administration has finally taken its first step to safeguard trade in the Gulf region, aiming to intervene in global energy transport security through financial tools.
On Friday, June 6 (Eastern Time), the U.S. International Development Finance Corporation (DFC), an American government agency, announced a maritime reinsurance plan of about $20 billion in the Gulf region. The plan will provide insurance—including war risk coverage—for ships passing through the Gulf, in order to restore transport in the Strait of Hormuz, a key route for global energy and commodities trade.
DFC’s move is seen as an important measure by the U.S. government to stabilize the energy market on both military and financial fronts. The Strait of Hormuz accounts for about one-fifth of global oil shipments; if shipping is blocked for a prolonged period, it could further push up oil prices and disrupt global supply chains.
$20 Billion Reinsurance Tool Only Applies to Maritime Insurance
DFC announced on Friday that the reinsurance plan launched in the Gulf region will provide shipping businesses up to about $20 billion in loss protection.
According to the DFC statement, this reinsurance tool will offer coverage in a “rolling quota” format, and currently only applies to maritime insurance, including war risk coverage. This mechanism aims to stabilize regional commercial activity and restore trade transport through key maritime channels.
DFC said it has selected “the best American insurance partners in the industry” to participate in the plan and has engaged extensively with insurers to design the reinsurance structure.
DFC also stated it will closely coordinate with the U.S. military in implementing the plan, including cooperation with the U.S. Central Command (CENTCOM), which oversees military operations in the Middle East.
DFC CEO Ben Black said that the new reinsurance plan will help restore market confidence so that oil, natural gas, gasoline, jet fuel, and fertilizers—key commodities—can once again flow through the strait to global markets.
Trump Calls for Insurance Support at “Reasonable Prices”
Prior to DFC’s reinsurance plan, U.S. President Trump announced this Tuesday that he had instructed DFC to provide political risk insurance and financial security assurances for “all maritime trade passing through the Gulf, especially energy trade, at very reasonable prices,” with a focus on energy trade.
Trump said at the time, “If necessary, the U.S. Navy will begin escorting oil tankers through the Strait of Hormuz as soon as possible,” saying, “in any case, the United States will ensure energy flows freely to the world.”
Until Friday, the Trump administration had not officially announced any military arrangements related to escorting ships. U.S. Energy Secretary Wright said on Friday that the U.S. Navy will “soon” begin escorting ships through the Strait of Hormuz, provided that “their [Iran’s] ability to cause trouble is greatly reduced.”
Previously, U.S. officials pointed out that as regional security risks rise, some ship operators are concerned that war risk insurance is inadequate and that this affects their navigation decisions. Through a government-led reinsurance tool, the government hopes to lower insurance costs and increase underwriting capacity.
Hormuz Strait Shipping Nearly Halted Due to War Threat
The background to this plan is the shock to global energy transport caused by escalating tensions in the Middle East.
The Strait of Hormuz, linking the Persian Gulf and the Gulf of Oman, is one of the world’s most important energy transport routes. It handles about 20% of global crude oil and 20% of liquefied natural gas (LNG) exports, and is also a major channel for commodities such as fertilizers.
The narrowest point of the Strait of Hormuz is only 24 nautical miles, and it is adjacent to Iran’s coastline. After the U.S. and Israel launched military strikes against Iran, Iran threatened to attack any ship attempting to pass through this waterway, causing shipping risks to rise sharply.
Media reports said that as insurance costs soared and security risks intensified, hundreds of oil and gas tankers were stranded in the Gulf region, with shipping activity nearly at a standstill.
Due to the lack of any sign of easing in U.S.-Israeli-Iranian hostilities, Goldman Sachs recently predicted that if disruptions in shipping through the Strait of Hormuz continue, oil prices could break $100 per barrel.
On Friday, Qatar’s energy minister warned that if oil tankers and other commercial ships cannot pass through the Strait of Hormuz, crude oil prices could soar to $150 per barrel within two to three weeks.
Private Insurance Market Still Underwriting; U.S. Seeks Combined Financial and Military Measures to Stabilize Energy Route
Despite rising risks in the Gulf region, some commercial insurers are still providing underwriting.
The Lloyd’s Market Association, representing the London insurance market, said there are still insurance offers for ships passing through the strait. Insurance brokerage Arthur J. Gallagher & Co. also pointed out that the London market is “willing and able” to insure ships traversing the waterway.
However, industry insiders believe that with war risks sharply rising, a government-supported reinsurance mechanism can significantly expand insurance capacity and reduce premium volatility.
Analysts believe that this U.S. maritime reinsurance plan signals Washington’s attempt to supplement military deterrence with financial tools to ensure the availability of key energy channels.
By acting as the “insurer of last resort,” the government can not only share the huge risks faced by insurance companies but also help restore the confidence of shipping companies and traders.
If this mechanism is successfully implemented, the market expects it will help alleviate problems such as tanker stoppages, tight energy supply, and oil price volatility, thereby stabilizing the global energy trade system.
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