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(Bloomberg) — The Trump administration announced a $20 billion reinsurance program aimed at reviving shipping in the Strait of Hormuz, where traffic has all but stopped amid the US and Israeli attacks on Iran.
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The US International Development Finance Corp. said Friday it is deploying maritime reinsurance, including war risk, in the Persian Gulf region to stabilize commerce. The facility will insure losses up to about $20 billion “on a rolling basis” and will apply only to vessels for now, according to a statement.
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The announcement comes days after President Donald Trump ordered DFC to offer insurance “at a very reasonable price” to ensure the flow of energy and other commercial trade in the Gulf as oil prices soar. His comments came after some governments, including the US, had suggested insurance availability was blocking transit. Trump also said the US military may escort ships in the Strait but no plans have yet been announced.
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The strait carries about a fifth of global oil flows, as well as gas, fertilizer and other products. Iran has threatened to strike vessels seeking to transit the waterway, fueling a surge in prices for oil and other fuels.
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“DFC and Treasury are coordinating closely with CENTCOM on next steps in the implementation of this plan,” the development agency said, referring to the US military’s Central Command.
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The DFC said it has identified “best-in-class, preferred American insurance partners.”
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Even before the DFC announcement, private insurance companies were continuing to offer premiums for vessels looking to move through the region. The Lloyd’s Market Association said on Thursday offers are being made, while broker Arthur J. Gallagher & Co. said the London insurance market is willing and able to cover ships looking to pass through the strait.
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Insurers have expressed interest in partnering with DFC to offer the reinsurance, according to an agency official. The structure of the program reflected extensive conversations the agency had with insurers, the official said.
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The private insurance offerings haven’t been enough to entice ships and their crews to travel through the Hormuz strait, with shipowners saying safety concerns around sending crews into a war zone are the main issue.
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While DFC said it is coordinating with CENTCOM, Treasury Secretary Scott Bessent said Friday afternoon he still doesn’t know whether US naval escorts will be needed in the Gulf.
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—With assistance from Alexandre Rajbhandari.
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(Updates with shipowners citing continuing safety concerns in penultimate paragraph.)
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English (US)