India is preparing sovereign guarantees to support insurers writing cover for vessels travelling through the Persian Gulf, as the Middle East war drives shipping risk higher, according to government and industry sources familiar with the plan.
One government source said the proposal includes a $1.5 bn sovereign guarantee fund. The aim is to give insurers reinsurance backing and liquidity support if insurance costs stay elevated.
A separate $300 mn fund is also being assembled with money from India’s insurance industry, the same source said. That pool would help absorb any sharp rise in claims. Taken together, the planned support reaches $1.8 bn. Big number, and not by accident.
War-risk premiums for maritime cover have surged, in some cases by as much as 1,000%, as the conflict in the Middle East raises the danger for vessels moving through the region. The jump has pushed costs sharply higher for shipowners, traders, and energy companies moving cargo along the route.
Three insurance industry sources said India’s insurance regulator recently sought feedback from market participants on what support is needed and how the funding should work in practice.
The planned guarantee structure would reduce India’s reliance on overseas reinsurance and give domestic insurers more confidence to keep offering cover as trade resumes through the region.
Maritime insurance covers ships and cargo against risks such as accidents, piracy, and conflict. War-risk protection usually sits outside standard policies and must be bought separately. Vessels entering conflict zones face much steeper rates, and right now those rates aren’t easing.
The latest conflict began on February 28, when the United States and Israel launched attacks on Iran. Tehran later closed the Strait of Hormuz and struck sites in other countries across the region.
Gaurav Agarwal, head of marine specialties at Prudent Insurance Brokers, said war cover remains available, though insurers are charging different rates and those prices are both significantly higher and highly fluid.
Insurers have widened the definition of risky zones well beyond the Strait of Hormuz. The expanded area now includes parts of the Red Sea, the Gulf of Aden, and approaches to the Arabian Sea.
Several large reinsurers, including India’s state-backed reinsurer GIC Re, have either pulled back from the business or raised premiums sharply, leaving insurers with limited reinsurance support. GIC Re did not immediately respond to a request for comment.
A sovereign-backed Indian pool would give insurers more confidence and lower the cost of shipping goods through the Persian Gulf corridor.
Rates for war-risk cover are likely to stay high for an extended period even if the Strait of Hormuz reopens.
According to Beinsure analysts, the issue is no longer only immediate disruption. Insurers are pricing for renewed instability, and that sticks.
