The FT reports on the matter, noting that US president Trump has given his word that the US would insure commercial vessels seeking passage through the Strait of Hormuz. And the US administration has looked into how to go about that by exploring plans to tie it with government insurance.

To be more specific, it would require the ships that are willing to be escorted by the US Navy to buy insurance from the Development Finance Corporation (DFC). That is the US government’s international investment arm so to speak. The insurance programme is said to be one that will be run by the DFC alongside Chubb, a private insurer.

For now, the sources say that it is unclear if Trump will want to proceed with this. But if put into effect, it will be mandatory for ships wanting the US to escort them through the Strait of Hormuz at this time. And to no one’s surprise of course, this will also provide a financial benefit to the US.

The insurance will require ships to pay for cover of hull, machinery, and cargo. And senior industry figures cited by the report say that it could generate tens of millions of dollars in profit for the US administration. That is of course if those ships safely make their way through the strait.

The full report can be found here (may be gated).

All of this might sound like decent ideas on paper, but I highlighted earlier in the week on why this won’t truly work from a practical sense. In case you missed it: Trump demands allies to help on Strait of Hormuz but here’s why it won’t work

The gist of it is:

“The most likely scenario for escorting ships would be to gather a bunch of them as a convoy and then move along slowly through the strait. It means that the opening up of the blockade in this instance would be more of a trickle rather than a flow/rush.

The speed of the movement of the convoy would be extremely slow, not least already having to cater to the slowest of the vessels among the bunch. However, there’s also the fact that these ships will still have to navigate through the thousands of naval mines laid out by Iran while at the same time needing to fight off drones and shore-based missiles. It’s a full war-torn republic.

And you also have to add to the fact that Iran likely has jammers in the region to disrupt GPS and AIS tracking. And that means most ships will still be flying blind, making it even more perilous to navigate through the strait.”

Sure, it does help to bring back some of the flow along the strait. But as mentioned, it’ll be more of a trickle than a resumption of fully normal operations.

This article was written by Justin Low at investinglive.com.