The US government's proposal to insure vessels transiting the Strait of Hormuz may not be enough to restore commercial shipping in the region, a Morningstar DBRS commentary has warned, raising fresh questions about the limits of public intervention in marine insurance markets roiled by conflict.
The escalation of the US-Israel-Iran war has disrupted navigation through the strait, a corridor carrying roughly one-fifth of global oil supply and seaborne gas.
Several marine insurers have withdrawn or suspended war risk coverage for Gulf-bound vessels, leaving a significant number of ships anchored outside the chokepoint.
Industry bodies have pushed back on the notion that cover has vanished entirely. The International Underwriting Association's Chris Jones said insurers maintain "well-established risk management processes" for war risks, while the International Union of Marine Insurance noted that a notice of cancellation "does not, necessarily, end the cover."
Single-voyage policies remain available where flag states authorize transit.
In response, Washington has proposed that the US International Development Finance Corporation provide political risk insurance and financial guarantees for vessels transiting Hormuz, potentially backed by naval escorts.
The DFC, however, is a development finance agency whose tools were designed for risks like expropriation and currency inconvertibility in emerging markets. JPMorgan energy analysts have estimated that roughly 329 vessels in the Persian Gulf would need about $352 billion in coverage, well above the DFC's statutory exposure cap of $205 billion as of December 2025.
William Henagan of the Council on Foreign Relations told NPR the agency cannot feasibly insure "all maritime trade."
The approach is not without precedent. During the Iran-Iraq conflict in the 1980s, Washington reflagged tankers and arranged naval escorts after private insurers pulled back. Following the September 11 attacks, the US government similarly issued war risk policies to keep shipping moving.
Morningstar DBRS noted that the core constraint is not only insurance availability but operational danger.
Missile strikes, drone attacks, and vessel damage have raised the probability of loss, and "insurance alone does not materially reduce the operational risk faced by crews and vessels."
The firm suggested a government reinsurance backstop modeled on the Terrorism Risk Insurance Act could prove more effective.
Under TRIA, private insurers remain frontline underwriters, with federal support activated only after aggregate losses exceed $200 million and each insurer absorbs a deductible equal to 20% of direct earned premiums.
The Treasury can recoup outlays through surcharges on commercial policies. The Government Accountability Office has found the framework played a stabilizing role in terrorism insurance markets.
Applied to marine insurance, such a model would preserve market-based pricing while limiting public exposure to catastrophic losses. Direct government insurance, Morningstar DBRS warned, risks displacing private capacity and concentrating risk on the public balance sheet.
It remains unclear whether any US backstop would extend to non-US-flagged vessels. Morningstar noted that "most vessels stranded around the strait are not linked to the US" Prolonged disruption at Hormuz could increase freight costs and amplify volatility in energy markets.
