The US Development Finance Corporation's $40 billion maritime reinsurance program — backed by Chubb, AIG, Berkshire Hathaway, Travelers, Liberty Mutual and Starr, and announced by President Trump as the mechanism that would restore energy flows through the Strait of Hormuz — has written zero business. Not one dollar of coverage has been placed. Not one vessel has transited under its protection.
The reason, according to underwriters, brokers and risk professionals who work the marine war market every day, is that the program was built on a fundamental misreading of why commercial shipping stopped moving through the world's most critical oil chokepoint. Washington concluded the problem was insurance availability. The market says the problem was — and remains — a war.
When US and Israeli forces launched airstrikes against Iranian targets on February 28, 2026, the Strait of Hormuz — through which approximately 20 million barrels of oil flow each day, representing roughly 20% of global petroleum consumption — did not close because of mines or missiles alone. Within 48 hours of those initial strikes, war risk premiums surged fivefold, major marine insurers canceled existing coverage, and the Lloyd's Market Association's Joint War Committee redesignated the entire Arabian Gulf as a conflict zone. Tanker traffic collapsed by more than 80% before Iran's physical blockade was even formally declared.
The narrative that took hold in the days that followed — in financial markets, in the press, and apparently in the White House — was that insurers had abandoned the market. That marine war risk coverage had simply ceased to exist. That story, the professionals closest to the market say, was wrong. And it had a $40 billion consequence.
"The main takeaway here is that the reduced traffic going through the Strait has nothing to do with what insurance is available or not available," said Steve Ogullukian, deputy global underwriting director and reinsurance director at the American P&I Club. "It's purely just a captain or a shipowner not wanting to put their crew at risk."
As Insurance Business America reported in its analysis of the misconception that reshaped how governments and markets understood the Hormuz crisis, Howden Re data showed war risk pricing on Hormuz transits climbing from roughly 0.10–0.125% of vessel value before the conflict to around 2–3% by March — elevated, but available. Capacity remained in the market. Insuring a $100 million tanker for a single Hormuz transit was running around $3 million in war risk premium. For a Very Large Crude Carrier with US nexus, Lloyd's List was quoting between $10 million and $14 million per voyage. Those are eye-watering numbers. They are not evidence of a market that walked away.
The Lloyd's Market Association said so formally. Three weeks into the conflict, with the misconception still circulating, the LMA issued a market statement: "We are still seeing reports that suggest insurance coverage is cancelled or unaffordable and that this is the reason that vessels are not transiting the Strait of Hormuz. This is not accurate." A survey of Lloyd's marine war market participants found that 88% retained appetite to write hull war risks, and over 90% continued to offer cargo coverage.
By the time that statement was issued, the DFC program was already operational — designed to solve a problem the market said did not exist.
The program contains a structural requirement that reveals its underlying logic — and its fundamental flaw. Coverage under the DFC facility is available only to vessels transiting under US naval escort. That convoy program has not materialized. Two ships were guided through the strait in early May under the short-lived "Project Freedom" effort. No operation has followed at scale.
Chubb CEO Evan Greenberg made the program's dependency explicit on the company's April 22 earnings call. The facility was designed not as a standalone commercial insurance product, but as part of a US-run convoy system. "The government wanted to support shipping through the Gulf with military convoys," Greenberg said. "That has yet to occur."
Those six words are the clearest explanation yet for why a program touted in March as a breakthrough for global energy trade has a balance sheet showing zero. The broking community had been saying the same thing in different language for weeks. "The reason ships are not moving is not through a lack of insurance; it is a question of the risk to crew and vessel safety being assessed by the ship masters and owners as too high," said Neil Roberts, head of Marine and Aviation at the Lloyd's Market Association.
The program's failure to launch is, in one sense, the least of the industry's concerns right now. The harder problems are accumulating for when the shooting stops.
As Insurance Business America has reported in its examination of the legal fault lines that will define thousands of Gulf insurance claims, the conflict has introduced a complication the marine war risk mechanism was not designed to handle: a conflict in which the United States has not formally declared war, in which official statements are carefully calibrated to avoid triggering certain legal thresholds, and in which the gap between what is happening on the water and what governments are willing to say is happening could determine the outcome of thousands of claims.
"We colloquially talk about it as a war, but from the United States' official position, it's not a war," said Mahmoud Abuwasel, an international disputes partner at Wasel & Wasel. "That distinction matters because it directly affects whether war-risk provisions in insurance policies are triggered."
The precedent is uncomfortable. During the Yugoslav conflict of the 1990s, insurers successfully argued before arbitration panels that the absence of a formal declaration of war was legally material — regardless of the scale or nature of the fighting. The policyholders lost.
The deeper issue exposed by the DFC program's zero-dollar ledger is what happens to war risk capacity and pricing long after any ceasefire. The answer from underwriters is that the damage to actuarial models will outlast the conflict by years.
As Insurance Business America explored in its reporting on whether a ceasefire can actually reopen the insurance market, the structural reasons for caution are embedded in how war risk insurance works. Coverage must be renegotiated individually for each vessel, on a voyage-by-voyage basis, with fresh actuarial assessments made by each layer of the reinsurance chain. Capacity withdrawn at the treaty reinsurance level must be reinstated through negotiation, not by political announcement.
The war demonstrated, in ways that decades of theoretical concern had not, that the strait could be closed. That knowledge is now priced into every future actuarial model. War risk premiums in the Red Sea, it bears remembering, surged 20-fold during the Houthi crisis of 2023–25 and remained substantially elevated long after attacks declined. The Hormuz disruption is larger, more structurally significant, and will leave a deeper mark.
The DFC, for its part, maintains the facility stands ready. "If needed," a spokesperson said, "DFC's Maritime Reinsurance facility will provide $40 billion of coverage to deliver on President Trump's directive to help restore maritime trade through the Strait of Hormuz."
That is a significant if — and the market, for once, is not the reason it remains unanswered.
