Tad DeHaven
Within days of the Trump administration’s February 28 attack on Iran, shipping through the Strait of Hormuz was slowing to a halt. Insurance coverage for shippers was being canceled or repriced, transit costs were spiking, and the administration was under pressure to convince markets that it could keep energy flowing.
On March 3, Trump issued a social media decree that he had “ordered” the government’s Development Finance Corporation (DFC) to insure “ALL Maritime Trade” in the Persian Gulf at “a very reasonable price.” I argued Trump was making a typically fanciful claim that would force his subordinates to improvise it into “probably something more narrow, conditional, and bureaucratic than what the president initially claimed.”
And that’s what’s happened.
The DFC announced on March 6 a maritime reinsurance facility of up to $20 billion on a rolling basis, limited to vessels that “meet the criteria,” and focused initially on hull & machinery and cargo coverage. Five days later, the DFC said that Chubb would serve as the lead insurance partner, with other American insurers participating behind it. In other words, the administration didn’t create universal, cheap, direct insurance for all shippers—it improvised a narrower backstop behind private insurers.
Reinsurance is insurance for insurers. So, shipowners could buy a policy from Chubb or another participating insurer, and the DFC’s backing would mitigate the risk to private coverage providers. That’s a real intervention, but it’s quite different than what the president promised.
Indeed, the DFC is backing private hull & machinery and cargo coverage to start, which covers damage to the ship itself and to the goods being carried. But there’s no full liability coverage yet. That’s an issue because if a ship is struck and causes pollution, damages another vessel, injures the crew, or requires the wreck to be salvaged, the costs could be enormous.
The narrower plan is also a tacit admission that the existing insurance market is still functioning. Private insurers appear to be still offering at least some coverage, albeit with much higher premiums and tighter terms. But with conditions in the Strait too dangerous for transit, insurance alone is insufficient to unclog the chokepoint. In fact, the head of the International Maritime Organization said today that adding naval escorts won’t be enough to eliminate the risk to shippers.
It may also explain why the administration chose the $20 billion figure. The Fiscal Year 2026 National Defense Authorization Act raised the DFC’s maximum contingent liability to $205 billion and expanded its geographic reach. But no more than 10 percent of that capacity can be used in high-income countries. Ten percent of $205 billion is $20.5 billion, so the announced facility appears to be designed to fit within that ceiling.
When JPMorgan estimated that the full coverage cost of Trump’s sweeping commitment would vastly exceed the DFC’s statutory authority, Treasury Secretary Scott Bessent called the report “terrible” and “completely irresponsible.” But what Bessent was really objecting to was analysts taking Trump’s words seriously.
It was the president, who would tell Fox News nine days after his grandiose declaration that ships stranded near the Strait needed to “show some guts,” that was completely irresponsible.
The bottom line is the administration predictably couldn’t make Trump’s assurance real. What has emerged instead is a limited offering that can’t deliver on his promise. That’s the same pattern I described in my original post and elaborated on in an essay for Vox: first comes the grandiose claim, then comes the improvisation.