"US to Create $20 Billion Reinsurance Facility for Strait of Hormuz"

[Financial News]

The report said the U.S. International Development Finance Corporation (DFC) has decided to create a $20 billion (about 29.67 trillion won) reinsurance program for vessels sailing through the Strait of Hormuz.
The move comes as the Strait of Hormuz, which handles about 20% of global oil and natural gas shipments, has been effectively choked off. Insurance premiums have soared under the threat of attacks from the Islamic Republic of Iran, and some insurers have refused to provide coverage, driving oil prices sharply higher.
According to the FT, DFC Chief Executive Officer Benjamin Black and Treasury Secretary Scott Bessent are expected to formally announce the launch of the reinsurance facility later in the day. The paper reported that the decision follows instructions from President Donald Trump.
Black expressed hope that the government-backed reinsurance, initially set at $20 billion, will "restore confidence in maritime trade and help stabilize international markets."
DFC, which functions as a U.S. state development bank, plans to work closely with U.S. Central Command (CENTCOM) to ensure the safe passage of ships operating not only in the Strait of Hormuz but also in surrounding waters in the Middle East and the broader Arab region.
In connection with this, President Trump has also ordered a naval escort operation involving U.S. Navy destroyers, fighter jets, and other assets.
Washington is thus taking both economic and military measures in an effort to bring down international oil prices, which have spiked sharply.
However, financial institutions including JPMorgan Chase are skeptical, arguing that this level of support is unlikely to be sufficient to stabilize markets and push oil prices lower.
They estimate that the actual amount of insurance needed is around $352 billion—more than 17 times the DFC’s $20 billion reinsurance facility. There is also growing doubt that even if the U.S. Navy escorts tankers and other vessels, it will be able to fully eliminate the risks posed by Iran’s missiles, drones, and naval mines.
dympna@fnnews.com Song Kyung-jae Reporter