U.S. Plan to Insure Ships in Strait of Hormuz Faces Global Market Hurdles

Washington’s $20 billion proposal to protect ships in the Strait of Hormuz highlights the complexities of the international marine insurance ecosystem.

As tensions in the Gulf continue to threaten global energy supplies, the United States has proposed an ambitious insurance program aimed at keeping ships moving through the vital Strait of Hormuz. However, industry experts say the plan is running into the complicated realities of the global marine insurance market.

President Donald Trump recently announced a proposal for the U.S. government to provide up to $20 billion in political risk insurance for ships operating in the region. The goal is to reassure shipping companies and ensure that oil and gas shipments continue to flow despite rising geopolitical risks. The coverage would also be supported, if needed, by U.S. Navy escorts to help protect vessels passing through the strategic waterway.

The responsibility for executing the plan was given to the U.S. Development Finance Corporation (DFC), which initially envisioned an “America First” insurance initiative led primarily by American insurers.

But the proposal quickly met resistance from industry players who say the marine war-risk insurance market is largely international and centered in London’s Lloyd’s market. Many of the ships and cargo moving through the Gulf are insured by non-U.S. companies, making a U.S.-only solution difficult to implement.

“There’s a whole ecosystem around war risks,” said David Smith, head of marine at broker McGill and Partners, noting that American insurers rarely operate within that specialized market.

After consultations with insurers and ship-owners, officials adjusted the proposal. Instead of directly selling policies, the DFC is now considering using the $20 billion as reinsurance, allowing global insurers to offset part of the risk.

The shift reflects a broader challenge: safeguarding critical shipping routes requires cooperation within a deeply interconnected global insurance and capital markets system.