Saudi Arabia is exploring a state-backed insurance scheme for ships and marine cargo as rising conflict risks make commercial war insurance increasingly expensive and difficult to obtain.

The kingdom has held discussions with London-based insurance brokers about creating a pooled facility that could provide cheaper coverage for vessels, cargo and other maritime assets operating in the region. The initiative comes as insurers raise premiums or restrict coverage because of the conflict with Iran and escalating attacks by Yemen’s Houthi rebels. (Financial Times)

Under proposals being discussed, the insurance pool could provide up to SAR700 million ($186 million) of commercial cover for each insured event, including incidents such as missile attacks or the seizure of a vessel. Additional financial support could come from the state-owned Saudi Export-Import Bank, providing a government-backed layer of protection. (Financial Times)

The need for additional coverage has become particularly important for Saudi Arabia’s maritime trade. Insurers have become more cautious about vessels operating in areas considered vulnerable to attacks, while some companies have refused to provide war-risk coverage for ships using important regional routes such as the Red Sea.

The Red Sea has become increasingly important for Saudi oil exports after disruption to shipping through the Strait of Hormuz. Any further deterioration in maritime security could therefore create significant economic and logistical risks for the kingdom.

Saudi Arabia is considering a structure in which insurers and reinsurers would provide the initial layers of coverage, while government-backed financing would provide additional capacity. Saudi Re and Riyadh Re are expected to participate, alongside potentially other international reinsurers. (Financial Times)

The proposed scheme reflects a wider problem facing the global insurance industry. As geopolitical conflicts increase the probability of attacks on ships, ports and infrastructure, insurers face potentially enormous losses that are difficult to price using conventional models.

The Saudi discussions follow an earlier US effort to support insurance for ships travelling through the Strait of Hormuz. That initiative was backed by insurers including Chubb and AIG and was intended to provide as much as $40 billion in coverage, but it had reportedly failed to write any cover several months after its launch. (Financial Times)

For Saudi Arabia, a domestic insurance backstop could help keep trade flowing while reducing the financial burden placed on shipping companies and exporters. It could also provide greater certainty for businesses operating in sectors such as oil, chemicals and logistics.

However, the proposed programme remains under negotiation. The final terms, including how much risk would ultimately be carried by the Saudi government, have not been settled and the discussions could still fail to produce an agreement. (Financial Times)

The development highlights how geopolitical instability is increasingly affecting not only governments and businesses but also the global insurance market. If private insurers continue to reduce their exposure to high-risk maritime routes, governments may face growing pressure to step in as insurers of last resort.

Reference: Financial Times, “Saudi Arabia holds talks over state-backed war insurance as costs jump” (August 24, 2026). Financial Times article