Lloyd's and Chubb Launch $400 Million War-Risk Insurance Facility to Reopen Strait of Hormuz Shipping

The world's largest insurance marketplace is stepping in to break a months-long shipping logjam in one of the world's most strategically vital waterways. Lloyd's of London, working with insurer Chubb as lead underwriter, has launched a new market consortium providing $400 million (approximately £316 million) in additional marine war-risk insurance capacity for vessels and cargo transiting the Strait of Hormuz. The facility includes separate coverage for hull, protection and indemnity (P&I), and cargo risks, and is designed to support the resumption of maritime trade through the chokepoint.

The launch follows the signing of an initial peace agreement between the US and Iran aimed at ending a conflict that erupted in February 2026. President Trump declared the agreement essentially complete and announced that the Strait of Hormuz would remain open. The waterway, through which roughly 20-25% of the world's seaborne oil trade and a significant share of global LNG normally passes, was effectively closed for months after US-Israeli airstrikes on Iran on February 28 triggered a cascade of insurance withdrawals and kinetic attacks on tankers.

The insurance dimension of the crisis was extraordinary. Within 48 hours of the initial strikes, war-risk premiums surged multiple-fold, with some replacement coverage offered at dramatically higher rates than pre-crisis levels. The Joint War Committee of the Lloyd's Market Association expanded its 'high-risk' designation to cover the entire Persian Gulf. Major marine insurers — including Norway's Gard and Skuld, Britain's NorthStandard, and the London P&I Club — suspended or cancelled war-risk cover for the region entirely. Tanker traffic through the strait collapsed by as much as 80-95%, and benchmark freight rates for Very Large Crude Carriers hit all-time highs. The US government's Development Finance Corporation (DFC) even stepped in at one point to backstop war-risk insurance, an unusual intervention highlighting the limits of private insurability in geopolitical crises.

Despite the new facility and peace agreement, shipping firms remain cautious. Industry representatives have said operators will need to see a robust body of evidence that vessels can transit safely before fully normalizing operations, given the residual risk of mines, missiles, and fast-attack craft. The episode has become a defining case study in how modern insurance architecture — with its tightly coupled P&I, reinsurance, and Joint War Committee designation systems — can amplify geopolitical shocks across global energy and trade flows.