India is considering setting up a ₹1,000 crore war risk insurance fund to safeguard its trade routes, as rising tensions in the Strait of Hormuz are disrupting global shipping and energy supplies. – The Economic Times
The decision comes as tensions in West Asia, connected to the ongoing Iran conflict, have turned one of the world’s most vital oil routes into a high risk zone. ETCFO Almost 20% of the world’s oil flows through the Strait of Hormuz, making it critical not only for India’s energy needs but also for global energy importers. 2026 Strait of Hormuz crisis
The situation has deteriorated in recent weeks. Attacks on vessels and military tensions have reduced ship movements, while global insurers have either sharply increased premiums or withdrawn altogether. ETCFO This has increased shipping costs and, in some cases, made operations unviable for exporters and shipping companies. – The Economic Times
In order to tackle this, the Indian government is considering a dedicated fund to support insurers providing war-risk cover for vessels operating in high-risk waters. BFSI.EconomicTimes The fund will serve as a financial cushion, allowing insurers to absorb losses in the case of damage resulting from war related incidents. TheTimesOfIndia
This measure is designed to maintain continuity of maritime trade. Without insurance, ships are generally unable to operate in high-risk areas, which can disrupt supply chains and delay imports and exports. A distant war, a direct hit: India’s trade arteries choke as Gulf shipping descends into chaos – The Economic Times
Such intervention has become necessary as global reinsurers retreat from covering high risk routes, leaving domestic insurers exposed to significant financial risk. By sharing this risk, the government aims to stabilize shipping operations and avoid a sharp increase in logistics costs.
The effects of the Hormuz crisis on the economy is already visible. Oil prices have risen and shipping costs have surged, pressuring global supply chains.
For India, which is heavily dependent on imported crude oil, any disruption in this region has an immediate impact on fuel availability and inflation.
However, experts caution that the 1,000 crore fund may prove to be insufficient if the conflict escalates or disruptions continue over a prolonged period. India plans ₹1,000 crore war-risk insurance fund as Hormuz crisis disrupts trade – The Economic Times
Nevertheless, the proposal highlights a broader shift in global trade dynamics. As geopolitical risks increase and private insurers become more cautious, governments are playing a larger role in ensuring economic stability and maintaining critical trade flows.
For more on global trade disruptions read: FirstReport.News
