Hormuz, The Trouble With Ship Insurance

The Distilled Perspective from the Desk of Patrick T. Bulger 
Capital Management & Analytics

2) The Insurance of Cargo Ships,

Insurance Companies are risk professionals.  
They require a level of calculated insulation from risk (of a ship blowing up).
These levels of conviction are usually attained over considerable time periods of trust & safety.

• The DFC (International Development Finance Corporation) 
  Has come out with a $40 Billion Reinsurance Program 

The insurance does not cover "independent" sailing. 
To stay within the "Scope of Coverage," 
a vessel must remain within a CENTCOM-designated corridor and 
under the active protection of a U.S. Navy surface combatant

The Lead Underwriter: 
Chubb is the primary "front-end" partner. They write the policies, but the DFC provides the reinsurance (the backstop). 

The Syndicate: 
Seven major U.S. insurers have joined to provide the capacity: 
Chubb, Travelers, Liberty Mutual, Berkshire Hathaway, AIG, Starr, and CNA. 

The Objective: 
By taking on the "first-loss" or extreme war-risk, the DFC allows these private firms to keep writing policies for a route that Lloyd's of London has essentially abandoned. 
•    Sounds Nice, But…

•    The Problems:
The News/Noise cycle may highlight a $40 billion DFC reinsurance program 
that can pay for 200 ships, 
but the Naval Bottleneck, Mines, & Size of Passage are logistically complex.

•    No Overtaking: 
The Strait is only 21 miles wide, 
but the safe, swept shipping lanes are much narrower—
often only 2 nautical miles wide in each direction. 
Convoys must move at the speed of the slowest ship (usually 10–12 knots). 

•    Single File: 
It presents difficulty with "overlap" of convoys in these narrow, mine-suspect corridors. 
This would force a one-in, one-out cadence that mathematically inhibits a return to 20+ ships per day until the "Smart Mine" threat is neutralized. 

Remember, normal ship flow is over 100 per day.

I see, No Huff, No Puff, No Blow the Mines Down,
Story-Time, Make-Belief, or Bluster that will give an All Clear or Open.

•    Conclusion Two,
The insurance is a psychological floor, 
I see the logistics of a 10–15 Ship Capacity as a ceiling, 

This continues the optics of a timeframe mismatch, 
Supply issues are now, the fix appears to be far away.

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Thanks for your time.
Talk soon,
PTB

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