India Plans $1.8 Billion Funds to Support Gulf Shipping Insurance

The Government of India is planning a $1.5 billion sovereign guarantee fund to provide liquidity and reinsurance support for vessels operating in the Persian Gulf. This measure, paired with a $300 million industry-funded pool to settle claims, aims to maintain trade flows amid escalating conflict in the Middle East.

These financial interventions follow a surge in maritime war-risk premiums, which have increased by as much as 1,000% in some instances. The instability began after the United States and Israel launched attacks on Iran on February 28. In response, Iran closed the Strait of Hormuz and conducted strikes on other regional sites.

Domestic insurance stability has deteriorated as major reinsurers, including the state-backed GIC Re, have either withdrawn coverage or sharply raised premiums. Insurers have also expanded the definition of risky zones to include the Red Sea, Gulf of Aden, and Arabian Sea. The Insurance Regulatory and Development Authority is currently seeking industry feedback to implement these funds and reduce India's reliance on overseas reinsurance.