India is preparing to introduce sovereign guarantees to support marine insurers as escalating tensions linked to the Iran conflict drive up risks and costs in global shipping.
According to sources, the government is working on a sovereign-backed mechanism to provide reinsurance support to domestic insurers, ensuring continued coverage for ships operating in high-risk zones such as the Strait of Hormuz.
The move comes as war-risk premiums have surged sharply, with some estimates indicating increases of up to 1,000% following the escalation of hostilities in the region. Global reinsurers have also reduced or withdrawn coverage, making it increasingly difficult for shipowners and cargo operators to secure insurance.
To address this gap, India is considering creating a sovereign guarantee fund—potentially supported by both government and domestic insurers—to absorb large claims and stabilise the insurance market. Such a backstop is expected to boost confidence among insurers and enable uninterrupted shipping operations despite heightened geopolitical risks.
The urgency of the measure is underscored by the broader impact of the conflict on trade. Shipping costs have risen significantly due to higher fuel expenses, insurance premiums, and route diversions, placing additional strain on exporters and importers.
Industry experts note that ensuring availability of insurance cover is critical for maintaining cargo flows through key energy corridors. Without adequate risk coverage, vessels may avoid affected routes altogether, leading to supply disruptions and further cost escalation.
The proposed sovereign guarantee framework reflects a proactive approach by the government to safeguard trade continuity and energy security, while reducing dependence on foreign reinsurers during a period of heightened global uncertainty.
