The United States government launched a $40 billion maritime reinsurance program in March, but two months later, it has not written a single policy. Despite being presented as the solution to restore energy flows through the Strait of Hormuz, the facility has seen zero dollars of coverage placed, and not one vessel has traveled under its protection. It is a major disconnect between federal policy and the reality of the shipping industry.
According to The Financial Times, the program is managed by the US Development Finance Corporation and backed by industry giants like Chubb, AIG, and Berkshire Hathaway. It was built on the assumption that a lack of insurance was the main reason tanker traffic had stalled in the region. However, those who work in the marine war insurance market every day say this was a complete misreading of the situation.
The real issue was never a lack of insurance capacity. The simple truth is that ship owners and captains do not want to put their crews and vessels in the middle of a war zone, and no insurance program changes that basic reality.
The $40 billion program has failed because insurance was never the real problem stopping ships from entering the strait
When US and Israeli forces launched airstrikes against Iranian targets on February 28, 2026, the impact on shipping was immediate. War risk premiums spiked and major insurers adjusted their coverage, but the market never actually walked away.
According to data from Howden Re, insurance was expensive but it remained available for those willing to pay the price. Trump has also faced criticism over how the Strait of Hormuz closure is affecting American fuel prices, with drivers paying $4.50 a gallon at the pump.
The Lloyd’s Market Association issued a formal statement three weeks into the conflict to clarify that reports of unavailable coverage were inaccurate. Their own data showed that 88% of participants still had the appetite to write hull war risks. This directly contradicts the core reasoning behind the government program.
The program also has a structural problem that has made it largely useless: it only covers vessels traveling under a US naval escort. As of May 17, 2026, that convoy system has not happened at any meaningful scale. Outside of a short-lived effort called Project Freedom, which guided two ships through the strait in early May, there have been no follow-up operations.
Chubb CEO Evan Greenberg confirmed this on an earnings call on April 22, noting that the facility was designed to support a military-led convoy system that simply has not happened. Neil Roberts, the head of Marine and Aviation at the Lloyd’s Market Association, said the lack of transit comes down to basic risk assessment.
When owners decide the danger to their crew and vessel is too high, no amount of government-backed insurance is going to change their minds. The instability in the region has also been unpredictable, as seen when Iran reversed its decision to reopen the strait within 24 hours after firing on two Indian ships.
There are also serious legal concerns surrounding how insurance claims would even be handled. Because the United States has not formally declared war, there is a large legal gray area around whether standard war-risk provisions are actually triggered.
Experts warn that this mirrors past disputes, such as those during the Yugoslav conflict, where the absence of a formal declaration left policyholders in a very difficult position. Even if the conflict ended tomorrow, the effects on the insurance market would be felt for years, as underwriters have already permanently changed how they model risk in the Strait of Hormuz.
Published: May 18, 2026 01:30 pm