Insurance giant Chubb will be the lead partner on the U.S. International Development Finance Corporation’s $20 billion Maritime Reinsurance Plan aimed at resuming commercial shipping in the Gulf, the agency said on Wednesday.
The U.S.-Israeli conflict has widened sharply in recent days and paralyzed shipping traffic through the Strait of Hormuz, a major global chokepoint in the Gulf.
Iran said the world should be prepared for oil to hit $200 a barrel as its forces attacked merchant ships on Wednesday in the blockaded Gulf. Meanwhile, U.S. President Donald Trump has repeatedly tried to reassure markets this week that the campaign will end soon.
So far there has been no let-up on the ground and no sign ships can safely pass through the Strait of Hormuz, where about a fifth of the world’s oil passes, raising the risk of the worst disruption to energy supplies since the oil shocks of the 1970s.
Maritime insurance covers ships and cargo against risks such as accidents, piracy or conflict, with shipowners paying premiums that rise as insurers assess the likelihood of losses.
War risk coverage is typically excluded from standard policies and must be purchased separately, often at sharply higher premiums for vessels sailing through conflict zones.
Without such coverage, ships and cargo worth hundreds of millions of dollars would be exposed to losses from attacks or seizures, leaving owners and financiers vulnerable and deterring vessels from sailing through such waters.
The DFC said its reinsurance facility will insure losses up to roughly $20 billion on a rolling basis and insurance will initially focus on hull and cargo.
“Together, DFC and Chubb have identified several American insurance companies to provide reinsurance policies behind Chubb and alongside DFC to expand market capacity,” the agency added.
(Reporting by Manya Saini in Bengaluru; editing by Krishna Chandra Eluri)
Photo by Ian Forsyth/Getty Images
