The US Treasury Secretary Scott Bessent said last week that a US insurance program designed to boost shipping through the Strait of Hormuz will begin soon.
Bessent made the announcement during a cabinet meeting of President Donald Trump at the White House.
The U.S. will provide reinsurance for losses up to $20bln in the Gulf region, to help restore confidence for oil, gasoline, LNG, jet fuel, and fertilizer shippers during the war on Iran.
The White House will offer naval escorts, political risk insurance and guarantees for the financial security of all maritime trade, especially energy, traveling through the Gulf, Trump said recently, in a bid to cool energy prices that have surged and give maritime shipping companies financial protection amid the war in Iran.
“The oil market is well-supplied. We’ve taken actions to ensure that oil supplies stranded at sea are made available to the global market,” Bessent said. “Your bold actions, like the Development Finance Corporation’s maritime reinsurance program, in conjunction with Central Command, will soon provide shippers through the Gulf region with a level of security we have never seen before.”
Bessent argued that shipping traffic in the Gulf region is starting to pick up and will increase in the coming days.
“We are starting to see more and more movement in and out of the Gulf today, and this is more than yesterday, and this is the beginning. I am confident that shipping traffic will continue to increase on a daily basis even before we secure the straits,” he continued.
Bessent’s remarks were delivered amid rising concern about oil and gas prices during the Iran war.
Bessent argued the US economy is better able to withstand short-term energy disruption. And even so, he said, Americans are willing to accept the short-term volatility if it means longer-term stability.
“Many people underestimate the will of the American people for short-term volatility for 50 years of safety that we are going to have on the other side of this,” Bessent said. “I believe energy prices will be lower, inflation will be lower. Before we had the appearance of security which is not real security. Now the American people and the world will have absolute security.”
Under the leadership of Trump, the U.S. International Development Finance Corporation (DFC) will work with Treasury Department to provide up to $20bln of maritime reinsurance in the Gulf region.
The DFC reinsurance facility will insure losses up to approximately $20bln on a rolling basis. This revolving insurance offering will apply only to vessels that meet eligibility criteria. Furthermore, insurance will focus on Hull & Machinery and Cargo to start.
The DFC and Treasury Department are closely cooperating with U.S. Central Command to implement the plan.
NYSE-listed property & casualty insurer and political risk and maritime insurance provider, Chubb, will act as the lead underwriter issuing policies for eligible vessels.
Together, DFC and Chubb have identified several American insurance companies to provide reinsurance policies behind Chubb and alongside DFC to expand market capacity.
