Will Trump’s shipping insurance plan work?

Summary

Podcast Summary: The Indicator from Planet Money

Episode: Will Trump’s shipping insurance plan work?

Date: March 10, 2026
Hosts: Darian Woods & Paddy Hirsch
Guests: Rachel Siemba (Fellow, Center for a New American Security), Maximilian Hess (Political Risk Consultant, En Metana Advisory)

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Overview

This episode tackles President Trump’s proposed solution to a global shipping crisis in the Persian Gulf, where more than a thousand cargo vessels are stuck due to security risks and soaring insurance premiums caused by war with Iran. The focus is on why “war insurance” has become a central player in this crisis, Trump's offer to provide US-backed reinsurance via the DFC (Development Finance Corporation), and the practical shortcomings and uncertainties surrounding this plan, with expert input on its feasibility and the broader risks at play.

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Key Discussion Points & Insights

1. The Persian Gulf Shipping Crisis (00:16 – 01:53)

• Scale of the Disruption:
  Over a thousand ships, including oil and gas tankers, are gridlocked west of the Strait of Hormuz, a vital trade route, due to the ongoing conflict with Iran.

  “I would describe it as a parking lot, as pathways that are frozen.”
  — Rachel Siemba, 01:24

• Insurance as a Bottleneck:
  Regular insurance excludes war-related risks; political (war) risk insurance is required but prohibitively expensive, compounding shipping paralysis.

2. War Insurance: Costs & Impact (01:54 – 03:50)

• War Insurance Skyrockets:
  Normally a minor percentage, insurance costs now hit double-digit percentages of cargo value.

  “Here we are very likely talking about double digit percentage points as a minimum.”
  — Maximilian Hess, 02:31

• Concrete Example:
  A $100M oil tanker’s war insurance jumped from $250,000 to at least $1 million for a single transit through the strait. (02:47–03:03)

• Illicit Shipping Continues:
  Only ships already operating “off the books” without insurance are risking passage.

  “Many of the vessels that are still transiting the straits are ones involved in illicit shadow trade… using evasive techniques… to evade sanctions.”
  — Rachel Siemba, 03:29

3. Trump’s Proposal: U.S. Backed Insurance (04:11 – 06:23)

• DFC’s Role:
  The Trump administration offers to have the US International Development Finance Corporation (DFC) provide up to $20 billion in reinsurance to support private insurers.

  “President Trump has offered to have what is called the DFC provide this kind of insurance.”
  — Maximilian Hess, 04:23

• DFC Background:
  Traditionally backs overseas development deals, not insurance risk, but has taken similar (smaller) steps during the war in Ukraine.

• Uncertainties:
  Coverage details remain murky—how much risk will $20B actually cover, at what price, and who will ultimately decide the rates? Insurance companies, not the government, will set premiums, and could keep them high.

  “I don’t think that the administration has a clear process in place for figuring out exactly what rates that it would charge.”
  — Maximilian Hess, 05:51

• Scope Limitations:
  DFC coverage excludes crew and environmental damage (e.g., oil spills), which can represent massive liabilities.

  “That can run up to a billion dollars per ship in insurance capacity limit because oil spills can be very damaging.”
  — Maximilian Hess, 06:23

4. Feasibility & Implementation Questions (06:23 – 07:58)

• Capacity and Experience Gaps:
  DFC is not an insurance expert and may lack the infrastructure for rapid, large-scale policy deployment.

  “Ben Black, the head of DFC and Treasury Secretary Bessant talk about having financial measures in the market in a couple of days. That sounds optimistic.”
  — Rachel Siemba, 07:03

• Industry Skepticism:
  Insurance professionals are highly detail-oriented, and the incomplete details could impede adoption.

  “The devil’s always in the details, but I would be looking particularly closely at these contracts.”
  — Rachel Siemba, 07:36

5. The Role of Security & Military Protection (07:58 – 08:46)

• Security Trumps Insurance:
  The greatest determinant of insurance costs is the perceived safety of transit; if the U.S. military can secure the strait, premiums drop and shipping resumes.

• Emerging Risks—Drones:
  Iran’s potential for deploying cheap naval drones presents a new, unpredictable threat.

  “Something we haven’t seen yet is the Iranians really successfully deploy naval drones… and that may very well prove to be a key part of this aspect as well.”
  — Maximilian Hess, 08:21

6. Conclusion: Insurance is Only Half the Battle (08:46 – 08:59)

• Insurance Alone Insufficient:
  The insurance solution can only work if the underlying physical risks are also managed.

  “Insurance is only part of the solution. In other words, it can only work when the strait is seen to be relatively safe.”
  — Paddy Hirsch, 08:46

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Notable Quotes & Memorable Moments

• “Why the world’s most boring financial product has turned into a trade terrorist hijacking the market in oil…”
  — Darian Woods, 00:37

• “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…”
  — Paddy Hirsch, 05:23

• “DFC has basically said, we're open. Call us and we'll talk about what we can do.”
  — Rachel Siemba, 07:03

• “Gray suits and steely eyes. You know, the kind that read the liability notice on their Instagram update from top to bottom every time.”
  — Paddy Hirsch, 07:27

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Key Timestamps

• 00:16 – Overview of the Persian Gulf crisis
• 01:24 – Rachel Siemba compares the Gulf to a “parking lot”
• 02:31 – Maximilian Hess on the surge in war insurance costs
• 03:29 – Illicit shipping and evasion tactics
• 04:23 – Trump’s DFC insurance proposal explained
• 05:51 – Unclear pricing and process for new insurance
• 06:23 – Crucial exclusions: crew and environmental liability
• 07:03 – Rachel Siemba on DFC readiness and optimism
• 08:21 – Maximilian Hess warns of naval drone risk
• 08:46 – Insurance isn’t a substitute for real security

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Summary

This concise, insight-rich episode of The Indicator deftly unpacks how the international shipping gridlock in the Persian Gulf is as much about insurance as about war itself. Trump’s DFC-backed plan offers a creative, yet untested, way to restart the flow of goods and stabilize oil prices. However, thorny issues—from incomplete coverage to logistical and security gaps—suggest that without broader safety guarantees, insurance alone can't untangle one of the world’s most complex trade crises.

Transcript

[NPR Announcer]

Npr.

[Darian Woods]

This is the Indicator from Planet Money. I'm Darian Woods.

[Paddy Hirsch]

And I'm Paddy Hirsch.

[Darian Woods]

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 strait and bring the price of oil back down. After the break.

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[Darian Woods]

Rachel Siemba says the Persian Gulf is a mess.

[Rachel Siemba]

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.

[Darian Woods]

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.

[Paddy Hirsch]

But that's not all.

[Rachel Siemba]

They're also facing much higher insurance costs. Insurance premium for their political risk insurance.

[Darian Woods]

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.

[Paddy Hirsch]

Yeah, because it's special and usually supplemental, this kind of insurance isn't cheap. Maximilian Hess runs a political risk consultancy called En Metana Advisory. He says right now war insurance is getting eye wateringly expensive.

[Maximilian Hess]

Normally, rates for marine war insurance are in the basis points, Right? They're 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.

[Darian Woods]

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 strait.

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 closed. A small number of ships do risk transiting each day, but Rachel says many of those vessels aren't insured.

[Rachel Siemba]

Many of the vessels that are still transiting the straits are ones involved in illicit shadow trade that were already working without insurance. And we're already involved in the kind of evasive techniques and tactics that allowed them to evade sanctions.

[Paddy Hirsch]

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. Fertiliser, natural gas, and, of course, oil.

[Darian Woods]

Yeah. So if you haven't seen already, brace yourself for higher gasoline prices.

[Paddy Hirsch]

Yes. But like a good neighbor, the 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.

[Maximilian Hess]

President Trump has offered to have what is called the DFC provide this kind of insurance.

[Darian Woods]

The dfc, or its full name, the US International Development Finance Corporation, was created during the first Trump administration. And Max says it's designed to fund ventures in countries overseas to buy US Goods and services.

[Maximilian Hess]

It usually takes risks, like supporting the development of an LNG plant in Mozambique. Sometimes it supports things like the export of Boeing planes.

[Darian Woods]

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.

[Maximilian Hess]

And then the DFC takes that reinsurance. They say we will take 25 million of a maximum potential $100 million loss

[Darian Woods]

related to these reinsurance, as in insuring the insurer in the Gulf. The DFC says it will provide up to $20 billion in reinsurance.

[Paddy Hirsch]

Yeah, 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,

[Darian Woods]

but right now, it's not clear how much coverage that money will actually provide. A lot will depend on the terms. They're a little hazy. For a start, what does a very reasonable price mean?

[Maximilian Hess]

I don't think that the administration has a clear process in place for figuring out exactly what rates that it would charge.

[Darian Woods]

That's because it's the insurance companies that will decide how much to charge, not the U.S. government. And those companies could still charge shipping companies very high rates.

[Paddy Hirsch]

And then there's the fact that the DFC is only providing coverage for a ship's hull to machinery and cargo. It's not providing coverage for the crew, and crucially, not for any environmental damage, which, if a ship is hit, could be considerable.

[Maximilian Hess]

That can run up to a billion dollars per ship in insurance capacity limit because oil spills can be very damaging.

[Darian Woods]

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 up, 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.

[Rachel Siemba]

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 Bessant talk about having financial measures in the market in a couple of days. That sounds. That sounds optimistic.

[Darian Woods]

Not least because the people who are going to be looking at what coverage the DFC is offering are insurance people.

[Paddy Hirsch]

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.

[Rachel Siemba]

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.

[Darian Woods]

The most important thing, Rachel says, will be the US Military's ability to make the Strait safe and provide security to shipping. If it can do that, insurance costs should fall and the oil, gas and fertiliser 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.

[Maximilian Hess]

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.

[Paddy Hirsch]

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.

[Darian Woods]

This episode was produced by Cooper Cats McKim with engineering by Senna Lofredo. It was Factor to Sierra Juarez Cake and Cannon is our editor and the indicator is a production of npr.

[NPR Announcer]

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