International credit ratings and research firm Morningstar DBRS said the U.S. government’s proposal to provide insurance support for ships transiting the Strait of Hormuz may not be enough to quickly resume commercial navigation in the region.
Morningstar DBRS noted in a recent commentary that the escalating conflict in the Middle East has severely disrupted shipping in the strategic waterway, which normally carries about a fifth of the world’s oil supplies as well as large volumes of offshore natural gas.
Morningstar DBRS explained that the deterioration of the security environment has caused a sharp increase in risks to commercial shipping. The company said several marine insurers have withdrawn or restricted war risk coverage for ships operating in the Gulf, leaving shipowners with limited insurance protection options.
This has resulted in an increasing number of ships remaining anchored outside the channel, with operators weighing the dangers of entering the area, according to Morningstar DBRS. The company noted that tankers have been targeted during the conflict, fueling concerns about potential loss of life, environmental liability and damage to high-value maritime assets. Morningstar DBRS adds that the cost of war risk insurance has increased significantly, although some cover is still available.
In response to the disruption, the U.S. government has proposed that the U.S. International Development Finance Corporation provide political risk insurance and financial guarantees for ships transiting the strait, Morningstar DBRS said.
The proposal also considers using naval escorts to accompany tankers through the area. Morningstar DBRS explains that its aim is to rebuild shipowners’ confidence and ensure the continued flow of energy supplies through one of the world’s most important sea routes.
Under the plan described by Morningstar DBRS, the agency could offer coverage directly or reinsurance to private insurers, possibly leveraging powers granted under the Merchant Shipping Act of 1936, which allows the U.S. Maritime Administration to issue war risk insurance and reinsurance.
However, Morningstar DBRS believes the impact of major government-provided insurance on the current backlog of ships waiting to pass through the channel is likely to be limited. The company said the main constraint affecting shipowners was not just the availability of insurance, but also the heightened operational risks associated with the conflict.
Morningstar DBRS noted that missile strikes, drone strikes and ship damage increased the likelihood of losses. According to Morningstar DBRS, insurance does not reduce the potential personal risks faced by crew members and ships. Morningstar DBRS said some shipowners may continue to avoid the route, even with government-backed guarantees, as long as the security situation remains precarious.
Morningstar DBRS also said naval escort capabilities may be limited compared to normal shipping volumes through the waterway. The company explained that dozens of large oil tankers typically pass through the Strait of Hormuz every day. Morningstar DBRS noted that even if escort arrangements were introduced, available naval resources would likely limit the number of ships that could be escorted at any given time, which could slow down transits and delay efforts to clear the backlog of ships waiting to transit.
Another consideration identified by Morningstar DBRS is the potential impact of direct government insurance on the private marine insurance market. The company explained that specialist marine insurers and P&I clubs have extensive expertise in underwriting war risks and handling complex maritime claims.
Morningstar DBRS said if government insurance was offered at subsidized rates, it could encourage further divestment by private insurers, concentrating risk exposure on public balance sheets.
Morningstar DBRS believes that public-private risk-sharing arrangements can provide a more effective alternative. The company pointed to the framework established under the Terrorism Risk Insurance Act after the September 11 attacks as a possible model. Morningstar DBRS explains that under this structure, the federal government does not provide primary insurance but instead acts as a financial backstop if industry losses exceed a predetermined threshold.
Morningstar DBRS said a similar approach to maritime war risk insurance could help stabilize the market while retaining a role for private insurers.
Insurers and P&I clubs can continue to cover voyages across the Gulf, while government support will only kick in if total losses are particularly large, the company said. Morningstar DBRS said such a framework would help maintain underwriting discipline, preserve established claims management processes and support the continued availability of private sector capabilities.
Morningstar DBRS also noted that policymakers could consider temporary mechanisms such as premium support or government guarantees, designed to ensure shipowners retain access to war risk insurance while the market adapts to the changing risk environment.
The company explained that war insurance premiums tend to rise sharply during conflicts, which may prevent shipowners from entering high-risk areas, even if insurance remains in effect. According to Morningstar DBRS, targeted support could help maintain shipping flows without displacing private insurers.
The company also said it was unclear whether any insurance support or naval escort programs introduced by the United States would be extended to ships that are not U.S.-flagged, owned or operated by U.S. interests. Morningstar DBRS observed that many ships currently waiting near the strait have no connection to the United States.
The company also stressed that any insurance initiatives would likely need to be supported by stronger maritime security coordination, including expanded multinational naval patrols, escort systems and intelligence sharing to reduce the risk of attacks on commercial shipping.
Morningstar DBRS said that from a credit perspective, the disruption highlights the critical role that marine war risk insurance plays in supporting global energy supply chains. The company said long-term cancellations could increase shipping costs, disrupt oil and gas shipments and increase volatility in energy markets.
Morningstar DBRS concluded that while government intervention may be necessary in times of geopolitical tension, policies designed to complement rather than replace private insurers are more likely to keep markets functioning.
According to Morningstar DBRS, a public-private framework similar to the Terrorism Risk Insurance Act could provide a more durable solution and help restore confidence among shipowners and marine insurers operating in the Gulf.
Marcos Alvarez, managing director of Global Financial Institutions Ratings, added: “War risk premiums can increase sharply during conflicts, which could prevent shipowners from transiting high-risk areas, even if coverage remains in place. “Targeted support mechanisms can help maintain shipping flows without driving private insurers out of the market.”
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