The Indicator from Planet Money - Will Trump’s shipping insurance plan work?

Episode Date: March 10, 2026

More than a thousand ships are stranded outside the Strait of Hormuz, bobbing in the water. A big reason? Insurance. War insurance premiums have skyrocketed since the war with Iran began. It’s an add-on that covers things regular insurance doesn’t, like missile strikes. And shippers don’t want to foot the bill or put their crews at risk. Cue the traffic jam. On today’s show, how a critical trade chokepoint became the parking lot of the sea. And taking stock of President Trump’s plan to offer reinsurance to get these ships sailing again.Related episodes: How the 'shadow fleet' helps Russia skirt sanctionsWill Iran block the Strait of Hormuz? For sponsor-free episodes of The Indicator from Planet Money, subscribe to Planet Money+ via Apple Podcasts or at plus.npr.org. Fact-checking by Sierra Juarez. Music by Drop Electric. Find us: TikTok, Instagram, Facebook, Newsletter.  See pcm.adswizz.com for information about our collection and use of personal data for sponsorship and to manage your podcast sponsorship preferences.NPR Privacy Policy

NPR. This is the indicator from Planet Money. I'm Daryne Woods. And I'm Patty Hirsch. Right now there's a traffic jam in the Persian Gulf. More than a thousand vessels are stuck floating in the warm sun-kissed seas of Saudi Arabia, Bahrain, Dubai. Oil tankers, gas tankers, container ships, bulk goods carriers. They're all trapped to the west of what has become the world's most famous trade choke point, the Strait of Hormuz. And there are a lot of reasons why these ships are stuck there.

all related to the war with Iran. But one of the biggest of all is insurance. On today's show, we'll learn why the world's most boring financial product has turned into a trade terrorist, hijacking the market in oil, which this week briefly soared to over $100 a barrel. But don't worry, President Trump has a plan. We will look into a solution to open the straight

and bring the price of oil back down after the break. Right now, Rachel Siember says the Persian Gulf is a mess. I would describe it as a parking lot, as pathways that are frozen. These are pathways that are normally bustling that now have very few vessels going through. Rachel is a fellow at the Center for a New American Security, where she focuses on economics, finance, and security issues. She says vessels aren't moving because they're worried about being attacked or seized by Iranian forces. But that's not all. They're also facing much higher insurance costs, insurance premium for their political risk insurance.

Political risk insurance, sometimes called war insurance. This is a special kind of insurance to cover stuff that regular shipping insurance policies generally don't. Like being hit by a missile or detained by the Iranian Navy. Yeah, because it's special and usually supplemental. This kind of insurance isn't cheap. Maximilian Hess runs a political risk consultancy, called N. Metana Advisory. He says right now, war insurance is getting eye-wateringly expensive.

Normally, rates for marine war insurance are in the basis points, right? There are a percentage of a percent of the value of a cargo. Here, we are very likely talking about double-digit percentage points as a minimum. For example, about a week ago, a tanker carrying oil worth $100 million through the Strait of Hormuz would have paid about $250,000 in war insurance. Today, it's at least a million bucks just for the day it takes to pass through the straight. And most shipping companies don't want to pony up that much, so they're staying put, well, most of them anyway. And this has created a level of disruption in the Gulf and global energy markets, not seen since the oil embargo of the 1970s.

It could end up being the worst the world has ever seen. That said, the strait isn't entirely close. A small number of ships do risk transiting each day, but Rachel says many of those vessels aren't insured. Many of the vessels that are still transiting the straits are ones involved in illicit shadow trade that we're already working without insurance. And we're already involved in the kind of evasive techniques and tactics that allowed them to evade sanctions. Yeah, legitimate shippers, though, don't want to take the risk of sailing without insurance, and they don't want to pay the exorbitant

premiums for coverage. And there's no other way out of the Gulf, of course, except by land. And that's crimping the supply of what's on these ships, fertilizer, natural gas, and, of course, oil. Yeah, so if you haven't seen already, brace yourself for higher gasoline prices. Yes, but, like a good neighbor, that Donald is here. Mr. Trump has come up with a plan to unclog the strait by offering his own war insurance at a, quote, very reasonable price. President Trump has offered to have what is called the UFC, provide this kind of insurance.

The DFC, or its full name, the U.S. International Development Finance Corporation, was created during the First Trump administration. And Max says it's designed to fund ventures and countries overseas to buy U.S. goods and services. It usually takes risks like supporting the development of an LNG plant in Mozambique. Sometimes it supports things like the export of Boeing planes,

Max says the DFC is not set up to take insurance risk, but it has taken a stab at this in the past. In recent years, it began offering a backstop to companies that were willing to take on the risk of insuring Ukrainian firms. And then the DFC takes that reinsurance. They say we will take $25 million of a maximum potential $100 million loss related to these products. Reinsurance, as an insuring the insurer. In the Gulf, the DFC says it will provide up to $20 million. $20 billion in reinsurance. Yeah, and Max says $20 billion is nothing to scoff at.

It could offer some cover for any American insurance companies that are willing to take on the risk of backing oil and gas tankers and other ships that run the strait of Hormuz. It could help get shipping going again. But right now, it's not clear how much coverage that money will actually provide. A lot will depend on the terms, and they're a little hazy. For a start, what does a very reasonable price mean?

I don't think that the administration has a clear process in place for figuring out exactly what rates that it would charge. That's because it's the insurance companies that will decide how much to charge, not the US government. And those companies could still charge shipping companies very high rates. And then there's the fact that the DFC is only providing coverage for a ship's hull machinery and cargo. It's not providing coverage for the crew and crucially not for any environmental damage, which, if a ship is safe, hit could be considerable. That can run up to a billion dollars per ship in insurance capacity limit, because oil spills can be very damaging. The DFC insurance plan is a creative use of an obscure government department to try to solve a pressing issue, Rachel says. It's all government money,

of course, and if losses rack off, it's the US taxpayer that will be on the hook. But it could work. With oil briefly spiking at more than $100 on Monday, though, it needs to work fast. and it's not yet clear how quickly the DFC can get its reinsurance plan up and running. Drawing up insurance contracts is not a simple business, after all, and the DFC doesn't have much experience or expertise in this area. DFC has basically said, we're open, call us, and we'll talk about what we can do. Ben Black, the head of DFC and Treasury Secretary Bessent, talk about having financial measures in the market in a couple of days.

That sounds optimistic. Not least because the people who are going to be looking at what coverage the DFC is offering are insurance people. Yeah, you know the types gray suits and steely eyes. You know, the kind that read the liability notice on their Instagram update from top to bottom every time. There's a number of things that haven't been resolved yet. And a number of questions about the fine print and whether companies would actually be able to collect on and be refunded, the full costs. The devil's always in the details, but I would be looking particularly closely at these contracts. The most important thing, Rachel says, will be the U.S. military's

ability to make the straits safe and provide security to shipping. If it can do that, insurance costs should fall, and the oil, gas, and fertilizer should flow. But Max argues, because of the asymmetrical nature of this war with Iran, the strait of Hormuz is still some way from being safe to traverse. I think people need to be focusing a lot more on the long-term drone risk. Something we haven't seen yet is the Iranians really successfully deploy naval drones. The cost of a naval drone is essentially the cost of a small car. You basically need a jet ski, Starlink or an equivalent, some kind of control system and a bomb.

And that may very well prove to be a key part of this aspect as well. Insurance is only part of the solution, in other words. It can only work when the strait is seen to be relatively safe. That's what's going to have to happen for Mr. Trump's plan to work. The episode was produced by Cooper Katz McKim with engineering by Sena LaFredo, who's fact-acted by Sierra Juarez. Cake and Canon is our editor and The Indicator is a production of NPR.