The Trump administration announces $20 billion offshore reinsurance plan to address Iran war

As the conflict with Iran continues to escalate, the Trump administration announced on Friday a $20 billion reinsurance plan to cover oil tankers and other maritime transportation, aiming to encourage ships to resume passing through the Strait of Hormuz.

On the same day, U.S. WTI crude oil futures surged over 12%, breaking through $90 per barrel. Due to the Iran conflict, oil tanker traffic in the Persian Gulf has nearly come to a halt, with some Gulf countries beginning to cut oil production because crude oil cannot be exported through the Strait of Hormuz.

It is reported that the U.S. International Development Finance Corporation (DFC) will provide up to $20 billion in revolving reinsurance coverage for related losses, initially focusing on hull, machinery, and cargo insurance.

The DFC and the U.S. Treasury Department stated that they are working closely with U.S. Central Command to implement this plan.

Ben Black, CEO of the DFC, said in a statement, “We are confident that this reinsurance plan will enable the transportation of oil, gasoline, liquefied natural gas, aviation fuel, and fertilizers through the Strait of Hormuz again, allowing these goods to flow back into global markets.”

The Strait of Hormuz is the world’s most critical oil transit chokepoint, handling about 20%-30% of global seaborne oil trade, with approximately 17 to 20 million barrels passing daily. Additionally, about 20% of global liquefied natural gas exports also pass through this strait.

U.S. President Trump stated on Tuesday that the U.S. will provide insurance coverage for commercial ships in the Persian Gulf region and, if necessary, arrange U.S. Navy escort.

Since the large-scale airstrikes launched by the U.S. and Israel against Iran last weekend, multiple oil tankers have been attacked. This has caused war risk insurance premiums to soar, with some insurers reducing or withdrawing coverage.

Senior shipping analyst Matt Wright from consulting firm Kpler said that, currently, insurance is not the main concern for shipowners.

He emphasized that, due to safety concerns for personnel and vessels, oil tankers are reluctant to pass through the Strait of Hormuz.

Wright stated, “The market must be convinced that Iran’s ability to continue waging war has been diminished.”

(Source: Cailian Press)