Chubb picked to lead US insurance backstop for Hormuz shipping
Chubb has been tapped as the primary US insurer for a government-backed program to keep commercial shipping moving through the Strait of Hormuz, as the Iran war continues to disrupt one of the world’s most important energy chokepoints.
The initiative, run by the US International Development Finance Corp. (DFC), is designed to restart flows of crude and refined products by backstopping war-related risks that have deterred many shipowners and crews from entering the Persian Gulf.
Under the plan, DFC will provide reinsurance for up to $20 billion of losses on a rolling basis, while Chubb will issue the underlying policies to shipowners. The coverage is narrowly focused on damage linked to the conflict and is intended to make voyages commercially viable despite the heightened danger.
“The commerce passing through the Strait of Hormuz plays a vital role in the global economy, and providing vessels with insurance protection is essential for resuming trade flows,” Chubb chairman and CEO Evan Greenberg said in a statement.
The program is being rolled out as oil markets grapple with the fallout from the war, which erupted at the end of February. Benchmark Brent crude climbed above $91 a barrel on Wednesday, extending gains since the conflict began. Prices have remained elevated even after the International Energy Agency said its member countries would coordinate the release of 400 million barrels from strategic stockpiles.
In normal conditions, roughly 15 million barrels a day of crude and another 5 million barrels a day of oil products transit the Strait of Hormuz, according to the IEA. That throughput has been sharply curtailed as hostilities and repeated attacks on shipping have raised the risks of using the route.
Crews are wary of sailing close to Iranian waters amid continuing strikes on vessels. On Wednesday, three ships off Iran’s coast were hit by projectiles, the UK Maritime Trade Operations center reported. Those incidents have reinforced industry concerns that even with financial protection in place, seafarers will be reluctant to transit a live conflict zone.
The strait, a narrow waterway along Iran’s southern coastline, links the Persian Gulf to the Arabian Sea and is the only maritime outlet for exports from several major oil producers. Any sustained shutdown or severe restriction of traffic has significant implications for global energy supply and pricing.
DFC’s facility is meant to address a specific slice of the problem: the cost of insuring vessels against war-related losses. The reinsurance will sit behind primary policies issued to eligible ships, and is expected to cover hull and machinery damage, cargo losses and associated environmental liabilities stemming from the conflict.
The DFC has left the door open to adding more participating insurers alongside Chubb as the program develops, to broaden capacity and market reach. For now, Chubb’s role as lead underwriter makes it the central private-sector counterparty for shipowners seeking protection under the scheme.
Even with the financial architecture in place, physical security remains the binding constraint. The prospect of missile or drone attacks, mining and miscalculation between armed forces in the region continues to limit interest in the route. Insurance can address price and balance-sheet risk, but it cannot remove the personal danger faced by crews.
