Lloyd’s, Chubb launch $400M war risk facility for Hormuz shipping

Lloyd's of London and Chubb ↗ 0.48% have launched a new marine war risk insurance consortium aimed at providing up to $400 million in capacity for vessels and cargo transiting the Strait of Hormuz, as the London market moves to rebuild coverage ahead of a potential surge in shipping traffic following a US-Iran deal.insurancebusinessmag+1

The consortium, with Chubb serving as lead underwriter, became available to brokers and clients on Friday. It offers up to $200 million of capacity separately for hull and protection and indemnity risks, addressing a critical coverage gap that has hampered commercial shipping through the strait for nearly four months.cityam+1

A Market Scrambling to Rebuild

The facility arrives at a pivotal moment for global maritime trade. The Strait of Hormuz, through which roughly a fifth of the world's oil passes, was effectively shut to standard commercial traffic after the United States and Israel launched strikes on Iran in late February. Within days, major P&I Clubs including Gard, Skuld, NorthStandard, and the London P&I Club cancelled war risk coverage across the Persian Gulf. Hull war premiums soared to as much as 10% of a vessel's value for high-risk propositions, up tenfold from pre-conflict levels.spglobal+4

The new Lloyd's-Chubb consortium builds on Chubb's existing role as lead underwriter for the US government-backed Gulf Maritime Insurance Facility, a $40 billion public-private partnership with the US International Development Finance Corporation that was announced in March. That facility brought together Travelers, Liberty Mutual, Berkshire Hathaway, AIG, Starr, and CNA as reinsurance partners.dfc+1

Ships Begin Moving Again

The launch coincides with a fragile reopening of the strait. Ships began trickling through Hormuz this week after the US and Iran reached a deal, though only a handful of vessels had crossed as of earlier this week. Analysts at maritime data firm Kpler estimated that traffic could rise to about 40 vessels per day — roughly 40% of pre-war levels — within a month if the agreement holds, but warned it could take eight weeks to fully clear the backlog of some 500 ships trapped in the Persian Gulf.cnbc+1

The Lloyd's Market Association had previously expanded its "high-risk" designation to cover the entire Persian Gulf, though it stressed in a statement that war insurance "remains available" within the Lloyd's and London company markets. A separate $1 billion marine war consortium led by Beazley, comprising $500 million each for hull war and cargo war, was announced in April.weforum+3

Stakes for the Global Economy

The insurance gap has had consequences well beyond shipping desks. With coverage either unavailable or prohibitively expensive, the strait's closure kept about 2,000 vessels stranded and removed a fifth of global oil supply from markets. The new consortium, alongside the DFC-backed facility and the Beazley initiative, represents the insurance industry's broadest effort yet to restore the commercial viability of Gulf transit — though whether shipowners and crews will return in force depends on how the fragile US-Iran agreement unfolds in the weeks ahead.fortune