Trump wants to insure Hormuz ships but the maritime insurance sector has other plans

US President Donald Trump's initiative to provide government-backed insurance for ships in the Gulf, aimed at easing disruptions to oil supplies caused by conflict, has faced significant practical challenges, said a report. The plan proposed offering political risk insurance at competitive prices and, if needed, US Navy escorts to ships. Trump said this was to "ensure the free flow of energy to the world" in a social-media post last week. 

According to the Wall Street Journal, industry stakeholders, however, have said this assurance has not yet resulted in clear guidelines or concrete action, making shipowners hesitant to participate.

The US Development Finance Corp (DFC) was assigned to implement the $20 billion "America First" insurance plan. Despite its goal to stabilise shipping markets, the proposal has met resistance from the maritime insurance sector, which highlights the dominance of Lloyd's of London and foreign insurers in covering war risks for vessels and cargo, the report added. 

David Smith, head of marine with broker McGill and Partners, said that there is a whole ecosystem around war risks and it is rare for US companies to position themselves anywhere near that ecosystem. 

Insurance premiums for vessels in the Gulf have risen sharply, now amounting to 1-2 per cent of a ship's value compared to about 0.25 per cent in peacetime, the report added. Ships linked to the US or Israel face the highest rates. While this pricing pressures operations, the main challenge remains uncertainty over the implementation and coverage of the federal scheme.

London-based insurers and brokers have been approached by US officials for information about the Lloyd's market but have been reluctant to share confidential data. Shipping companies and brokers say insurance availability is not the main deterrent to sending vessels through the Strait of Hormuz. Jerry Kalogiratos, Chief Executive of Capital Clean Energy Carriers, said it is more about the crews than taking on insurance for damages.