Chubb has been chosen as the main insurer in a new U.S. government-backed program aimed at keeping commercial shipping moving through the Strait of Hormuz, a crucial passage for global energy supplies. This move comes amid ongoing conflict in the region, which has made shipping through the strait risky and unstable.
The initiative is managed by the U.S. International Development Finance Corporation (DFC). Its goal is to encourage shipowners and their crews to continue using the Persian Gulf route by providing insurance coverage for war-related risks. The DFC will offer reinsurance support of up to $20 billion on a rolling basis, while Chubb will sell the primary insurance policies to ship operators. This coverage is specifically designed to protect against damage linked directly to the conflict.
Evan Greenberg, Chubb’s chairman and CEO, emphasized the importance of the Strait of Hormuz for global trade. He said that providing insurance is essential for restarting the flow of goods through this critical channel.
The timing of the program is significant. The war in the region, which began in late February, has caused oil prices to surge. Brent crude, a global benchmark, recently rose above $91 per barrel. Despite a coordinated release of 400 million barrels of oil from strategic reserves by International Energy Agency member countries, prices have stayed high, reflecting concerns about supply disruptions.
Under normal conditions, about 15 million barrels of crude oil and 5 million barrels of refined products pass through the Strait of Hormuz each day. But the conflict and frequent attacks on vessels have sharply reduced that volume. Ship crews are especially cautious due to ongoing strikes near Iranian waters. Just this past Wednesday, three vessels were hit by projectiles near Iran’s coast, according to the UK Maritime Trade Operations center.
The strait is a narrow waterway along Iran’s southern coast, connecting the Persian Gulf to the Arabian Sea. It serves as the only maritime route for exports from several major oil producers. Any long-term closure or heavy restrictions here could have major effects on global energy markets and prices.
The DFC’s insurance program targets only the war-related risk of vessels using the strait. It covers hull and machinery damage, cargo losses, and environmental liabilities resulting from the conflict. While Chubb is currently the sole private insurer involved, the DFC is open to bringing in more insurers to expand coverage.
Despite this financial support, the real challenge remains safety. The threat of missile or drone strikes, naval mines, and accidental clashes between military forces keeps many shipowners and crew members hesitant. Insurance can help with the financial impact, but it can’t eliminate the direct dangers faced by people working in the area.
With this new setup, officials hope to ease some concerns and help stabilize the movement of vital energy supplies through one of the world’s most important shipping routes.