$40b Persian Gulf maritime reinsurance facility depends on US military convoys

Int’l desk: A $40 billion US-backed maritime reinsurance facility for the Strait of Hormuz is set to activate, but it will only do so once specific conditions involving US military convoys are met. Chubb Chairman and CEO, Evan Greenberg, confirmed that the reinsurance programme will become operational only when the risk environment is deemed appropriate for the deployment of military convoys, a situation that has not yet occurred.

“The government wanted to support shipping through the Gulf and open up when they think that the risk environment is such that they can support with military convoys,” Greenberg explained. “That has yet to happen.”

This reinsurance facility, designed to offer insurance protection for vessels navigating the crucial Strait of Hormuz, plays a key role in ensuring the continuation of global trade. Greenberg highlighted the importance of commerce passing through this waterway, emphasising that its smooth operation is vital to the global economy. As such, the insurance coverage is seen as critical for the ongoing flow of international shipping.

The facility was created in response to disruptions in shipping caused by the ongoing conflict between the US and Iran, which has disrupted shipping activities in the region. The US International Development Finance Corporation (DFC) initially partnered with Chubb as the lead underwriter, with a starting coverage of $20 billion. The coverage has since been expanded to $40 billion, with Chubb working alongside partners such as Travelers, Liberty Mutual, Berkshire Hathaway, AIG, Starr and CNA. The coverage includes war risks for hull, liability (P&I) and cargo.

Chubb is responsible for managing the pricing, terms, policies and claims related to the programme. However, its activation remains contingent upon the presence of US naval convoys, which will assume 50% of the risk. Despite the large coverage, no premium revenue has been generated as of yet.

Greenberg added that Chubb was approached by the US government to support shipping, the military and the broader economy, underscoring the strategic significance of the programme to both the insurance industry and global trade.