Will Trump’s shipping insurance plan work?

What It Covers

War between the US and Iran has created a maritime traffic jam in the Persian Gulf, with marine war insurance costs surging from basis points to double-digit percentages, pushing oil above $100 per barrel and prompting a Trump administration reinsurance plan.

Key Questions Answered

• •War Insurance Cost Surge: Marine war risk premiums for Strait of Hormuz transits have jumped from roughly $250,000 to over $1,000,000 per vessel per day on $100M cargo loads — a shift from basis-point fractions to double-digit percentage points that makes most legitimate shipping economically unviable.
• •DFC Reinsurance Mechanism: The US International Development Finance Corporation is offering up to $20B in reinsurance backstops to encourage private insurers to cover Gulf-bound vessels. However, coverage excludes crew liability and environmental damage, which alone can reach $1B per ship in oil-spill scenarios.
• •Shadow Fleet Loophole: Uninsured vessels already operating outside sanctions compliance continue transiting the strait freely. Legitimate shippers face a structural disadvantage — they cannot legally operate without coverage, meaning illicit operators effectively gain market share during the crisis.
• •Drone Threat Undermines Insurance Fix: Even full insurance coverage cannot restore normal shipping flows if physical security remains compromised. Low-cost Iranian naval drones — assemblable for roughly the price of a small car using jet skis, Starlink, and explosives — represent an unresolved asymmetric threat that insurance cannot price away.