The Indicator from Planet Money

Will Trump’s shipping insurance plan work?

March 10, 2026

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  • Skyrocketing war insurance premiums, which can cost over a million dollars for a single transit through the Strait of Hormuz, are causing a massive traffic jam of oil, gas, and container ships. 
  • President Trump's plan involves the U.S. International Development Finance Corporation (DFC) offering up to $20 billion in reinsurance to encourage U.S. insurance companies to cover the risks associated with shipping through the strait. 
  • The success of the DFC's reinsurance plan hinges not only on the unclear terms and pricing of the coverage but, more critically, on the U.S. military's ability to secure the Strait of Hormuz against threats like low-cost naval drones. 

Segments

Strait of Hormuz Traffic Jam
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(00:00:25)
  • Key Takeaway: Oil tankers and carriers are trapped west of the Strait of Hormuz primarily due to soaring war insurance premiums.
  • Summary: Vessels carrying oil, gas, and bulk goods are stuck near the Strait of Hormuz due to risks associated with the war with Iran. Insurance is cited as one of the biggest factors causing this maritime traffic jam. This disruption briefly caused oil prices to soar above $100 a barrel.
Political Risk Insurance Costs
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(00:01:54)
  • Key Takeaway: War insurance rates have increased from basis points to double-digit percentage points of the cargo value.
  • Summary: Political risk insurance, or war insurance, covers events like missile strikes or detention by Iranian forces, which regular policies exclude. Normally inexpensive, these rates are now ’eye-wateringly expensive,’ potentially costing over a million dollars for a single day’s transit through the strait for a $100 million cargo.
Shadow Fleet Transit
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(00:03:22)
  • Key Takeaway: The few ships still transiting the strait are often involved in illicit shadow trade and operate without insurance.
  • Summary: Legitimate shippers avoid the exorbitant premiums and risks of sailing uninsured. Vessels that continue moving are frequently those already engaged in evading sanctions, using tactics that allow them to operate without standard insurance coverage.
Trump’s DFC Insurance Plan
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(00:04:11)
  • Key Takeaway: President Trump proposed the DFC offer up to $20 billion in reinsurance to lower shipping costs and unclog the strait.
  • Summary: The DFC, normally focused on funding overseas ventures, would provide reinsurance—insuring the primary insurers—for American companies taking on the risk of backing tankers in the Gulf. This plan aims to provide coverage for the ship’s hull, machinery, and cargo, but excludes crew and environmental damage liability.
DFC Plan Uncertainties
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(00:05:44)
  • Key Takeaway: The effectiveness of the DFC plan is hampered by hazy terms, the DFC’s inexperience with insurance risk, and the exclusion of critical liability coverage.
  • Summary: It is unclear what a ‘very reasonable price’ means, as insurance companies, not the government, will ultimately set the rates. The DFC’s coverage excludes crew and environmental damage, which could cost up to a billion dollars per ship in the event of a major spill. The DFC’s optimistic timeline of having measures active in ‘a couple of days’ is questioned due to the complexity of drawing up contracts.
Security vs. Insurance Solution
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(00:08:00)
  • Key Takeaway: The fundamental prerequisite for lower insurance costs and restored flow is the U.S. military ensuring physical security in the strait.
  • Summary: Insurance solutions can only succeed if the strait is perceived as relatively safe for traversal. The long-term threat of asymmetrical warfare, specifically the potential successful deployment of low-cost naval drones by Iran, remains a significant risk factor beyond what insurance can fully mitigate.