Trump's First Step to Protect Gulf Shipping: The U.S. Launches $20 Billion Marine Reinsurance Tool

As conflicts in the Middle East escalate and shipping through the Strait of Hormuz nearly comes to a halt, the Trump administration has finally taken the first step to secure trade in the Gulf region by intervening in global energy transportation safety through financial tools.

On Friday, Eastern Time, the U.S. government’s development finance agency, the U.S. International Development Finance Corporation (DFC), announced the launch of a roughly $20 billion maritime reinsurance program in the Gulf region to provide insurance—including war risk coverage—for ships passing through the area, helping to restore the vital energy and commodity trade route of the Strait of Hormuz.

This move by the DFC is seen as an important means for the U.S. government to stabilize energy markets on both military and financial levels. The Strait of Hormuz accounts for about one-fifth of global oil transportation. If shipping remains disrupted for a long period, it could further drive up oil prices and disturb global supply chains.

$20 Billion Reinsurance Tool Only for Vessel Insurance

On Friday, the DFC announced that the reinsurance plan in the Gulf region will provide up to approximately $20 billion in loss coverage for shipping.

According to the DFC statement, this reinsurance tool will be offered on a “rolling quota” basis, currently limited to vessel insurance, including war risk coverage. The mechanism aims to stabilize commercial activity in the region and restore trade through key maritime routes.

The DFC stated that it has selected “the best U.S. insurance partners in the industry” to participate in the plan and has engaged extensively with the insurance sector to design the reinsurance structure.

The agency also said it will work closely with the U.S. military to implement the plan, including cooperation with U.S. Central Command (CENTCOM), which oversees military operations in the Middle East.

Ben Black, CEO of the DFC, said the new reinsurance plan will help restore market confidence, allowing critical goods such as oil, natural gas, gasoline, jet fuel, and fertilizers to flow through the strait back into global markets.

Trump Calls for “Reasonable Price” Insurance Support

Before the launch of the DFC’s reinsurance plan, President Trump announced this Tuesday that he had directed the DFC to provide “political risk insurance and financial security guarantees” at “very reasonable prices” for “all maritime trade passing through the Gulf, especially energy trade,” with a focus on energy.

Trump stated at the time, “If necessary, the U.S. Navy will begin escorting oil tankers through the Strait of Hormuz as soon as possible,” adding that “the United States will ensure the free flow of energy to the world no matter what.”

Until this Friday, the Trump administration had not officially announced military escort arrangements. Energy Secretary Rick Perry said on Friday that the U.S. Navy will “begin escorting ships through the Strait of Hormuz as soon as possible,” provided that “Iran’s ability to cause trouble is significantly reduced.”

U.S. officials previously noted that as regional security risks increase, some shipping operators are worried about insufficient war risk insurance, which could impact their navigation decisions. Through government-led reinsurance tools, the government hopes to lower insurance costs and increase underwriting capacity.

Shipping Through the Strait of Hormuz Nearly Stalled Due to War Threats

The background of this plan is the impact of escalating tensions in the Middle East on global energy transportation.

The Strait of Hormuz, connecting the Persian Gulf and the Oman Gulf, is one of the world’s most important energy transit routes, handling about 20% of global crude oil exports and 20% of liquefied natural gas (LNG). It is also a key route for bulk commodities like fertilizers.

The narrowest point of the strait is only 24 nautical miles, lying close to the Iranian coast. After the U.S. and Israel launched military strikes against Iran, Iran threatened to attack any ships attempting to pass through the waterway, sharply increasing shipping risks.

Media reports indicate that, with insurance costs soaring and security risks intensifying, hundreds of oil and gas tankers have been stranded in the Gulf region, with shipping activity nearly coming to a halt.

Given the lack of signs of easing in U.S.-Israel-Iran hostilities, Goldman Sachs recently projected that if the disruption of shipping through the Strait of Hormuz continues, oil prices could break through $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 surge to $150 per barrel within two to three weeks.

Private Insurance Market Still Covering, U.S. Seeks to Use Financial and Military Means to Stabilize Energy Routes

Despite increasing risks in the Gulf region, some commercial insurance providers continue to offer coverage.

The Lloyd’s Market Association, representing the London insurance market, stated that there are still insurance quotes available for ships passing through the strait. Insurance broker Arthur J. Gallagher & Co. also noted that the London insurance market “is willing and able to provide coverage for vessels passing through this waterway.”

However, industry insiders believe that, amid sharply rising war risks, government-backed reinsurance mechanisms can significantly expand insurance capacity and reduce premium volatility.

Analysts see the U.S. launch of this maritime reinsurance plan as a move to supplement military deterrence with financial tools, ensuring the key energy corridor remains open.

By playing the role of “ultimate underwriter,” the government can not only share the enormous risks faced by insurance companies but also help restore confidence among shipping companies and traders.

If the mechanism is implemented smoothly, market expectations are that it will help alleviate issues such as ship stoppages, energy supply shortages, and oil price fluctuations, thereby stabilizing the global energy trade system.

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