US launches $20bn reinsurance facility for Gulf shipping
Trump ordered initiative comes despite London market insurers continuing to provide cover at sharply higher rates
Development Finance Corporation to offer US state-backed coverage in hopes of restarting shipping through Strait of Hormuz, but details remain unclear
THE US government has unveiled initial details of its $20bn reinsurance facility aimed at restarting shipping through the Strait of Hormuz following the American and Israeli strikes on Iran.
The US Development Finance Corporation announced on Friday that its facility would be insuring losses up to about $20bn “on a rolling basis” and will apply only to vessels “that meet the criteria”, according to a statement.
Details of what that criteria entails were not immediately available.
DFC chief executive Ben Black and US Treasury Secretary Scott Bessent launched the facility, following a directive from US President Donald Trump to create a political risk insurance and financial security mechanism to ensure free energy flows. Trump also said the US Navy would escort tankers through the Strait “if necessary”, however no further details of that plan have been unveiled.
“DFC and Treasury are coordinating closely with CENTCOM on next steps in the implementation of this plan,” the development agency said, referring to the US military’s central command.
The DFC said it has identified “best-in-class, preferred American insurance partners”.
The DFC plan was ordered by Trump after some governments, including the US, had suggested insurance availability was blocking transit. However insurance has continued to be provided by the market, albeit at significantly increased rates.
The Lloyd’s Market Association said on Thursday following meetings with US government representatives, that it welcomed the DFCs intention to “support the movement of non-sanctioned vessels and their commodities through the Strait of Hormuz in order to facilitate global trade and economic stability”.
However, the LMA also noted that “it is important to note that the vast majority of these vessels are insured in the London market and for those vessels, insurance currently remains in place”.
While Lloyd’s List understands that insurers have expressed interest in partnering with DFC to offer the reinsurance, details on Saturday remained unclear.
DFC, the US government’s international investment arm, said it will closely coordinate with Central Command, which runs American military operations in the Middle East.
“Working alongside Centcom, DFC coverage will offer a level of security no other policy can provide,” Black said. “We are confident that our reinsurance plan will get oil, gasoline, [liquefied natural gas], jet fuel and fertiliser through the Strait of Hormuz and flowing again to the world.”
Separately, Bessent said the US may lift sanctions on further Russian oil supply after a move Thursday to give Indian refiners the green light to purchase crude from the nation.
“Treasury agreed to let our allies in India start buying Russian oil that was already on the water,” Bessent said in an interview with Fox Business Friday. “To ease the temporary gap of oil around the world, we have given them permission to accept the Russian oil. We may unsanction other Russian oil.”
Bessent said there’s “hundreds of millions of sanctioned barrels” of crude on the water now. “In essence, by unsanctioning them, Treasury can create supply,” he said.
Brent crude rose above $100 a barrel on Monday, its highest level since the start of the war.
This article first appeared in Lloyd's List, a sister publication of Insurance Day
