Amid the escalating tension in Middle East that has severely affected the Strait of Hormuz, the United States has doubled its maritime reinsurance coverage to $40bln and added new insurance partners. The US insurance program, which is designed to boost shipping through the Strait of Hormuz, will begin soon.
The U.S. International Development Finance Corporation (DFC) had announced a $20bln reinsurance program last month.
On top of DFC’s $20bln in rolling coverage, NYSE-listed property & casualty insurer and political risk and maritime insurance provider, Chubb, and these new partners will provide an additional $20bln, bringing the total maritime reinsurance facility to $40bln.
The reinsurance facility will insure losses up to approximately $40bln on a rolling basis: $20bln from DFC and $20bln from Chubb and the additional partners.
The plan is designed to deliver on President Trump’s directive to help restore maritime trade through the Strait of Hormuz, stabilize international commerce, and support American and allied businesses operating in the Middle East during the conflict with Iran.
On Friday, DFC said American insurance partners such as Travelers, Liberty Mutual Insurance, Berkshire Hathaway, AIG, Starr, and CNA will join Chubb to provide reinsurance for DFC’s maritime reinsurance plan.
Chubb, acting as lead underwriter, will manage the facility, determine pricing and terms, assume risk, and issue policies for eligible vessels and cargo. Chubb will also manage all claims.
The facility will provide war marine risk insurance for hull & liability as well as cargo. Coverage will be offered for war hull risk insurance, for war P&I insurance, and war cargo insurance.
DFC and its interagency partners will determine if a vessel is eligible to participate in the reinsurance facility based on the information collected from applicants, a sanctions and Know Your Customer vetting process, and other information obtained and deemed relevant by DFC and its interagency partners.
“DFC is proud to welcome Travelers, Liberty Mutual, Berkshire Hathaway, AIG, Starr, and CNA as additional reinsurance partners for our joint $40 billion Maritime Reinsurance plan,” said DFC CEO Ben Black. “Along with Chubb, these leading American insurers bring deep underwriting experience in marine and marine war coverage, strengthening our efforts to help restore confidence in maritime trade.”
DFC will publicly announce the opening of the application portal and provide additional information concerning the application process soon.
To qualify, the DFC is requiring applicants to provide, among other details, the origin and destination country of the vessel, major beneficial owners of the vessel and domiciles, owner of the cargo and domicile of the owner, and information about the lenders financing the vessel.
The effective closure of the strait has roiled markets and triggered a broad energy crisis.
Restoring confidence to shippers willing to move through the Strait of Hormuz is one of the most pressing objectives of the US.
