JP Morgan Warns DFC Insurance Cap is Too Small for the Risk

In an oil flash note sent to Rigzone late Wednesday by Natasha Kaneva, J.P. Morgan’s head of global commodities strategy, analysts at the company, including Kaneva, warned that the Development Finance Corporation’s (DFC) insurance cap is “too small for the risk”.

The J.P. Morgan analysts highlighted in the note that, “to reopen the Strait [of Hormuz], President Trump announced on Tuesday that the U.S. will escort and insure all commercial vessels transiting Hormuz, leveraging the Development Finance Corporation”.

Focusing on oil tankers in the flash note, the analysts estimated that roughly 329 vessels are currently inside the Gulf. They noted that each would require oil pollution, salvage, hull, and third‑party liability coverage in the event of a total loss, “implying about $352 billion of maximum insurance coverage that private markets are not presently providing”.

The J.P. Morgan analysts pointed out that the DFC operates under a statutory Maximum Contingent Liability, which they noted was initially set at $60 billion but raised to $205 billion through 2031 in its latest reauthorization.

“By law, no single project or counterparty may exceed five percent of total exposure (currently about $10.25 billion),” the analysts highlighted.

“There is precedent for the DFC providing political risk insurance for war related losses when private markets withdraw (most recently in Ukraine), although recent PRI facilities have been relatively small,” they added.

“As of YE 2025, the DFC reported approximately $51.5 billion in portfolio exposure, implying roughly $154 billion of remaining headroom under the $205 billion cap,” they continued.

“Accordingly, any program requiring exposure beyond these statutory limits would require a change to the authorizing legislation – i.e., an act of Congress,” the analysts warned.

Rigzone has contacted the White House for comment on J.P. Morgan’s flash note. At the time of writing, the White House has not responded to Rigzone.

In a statement posted on his Truth Social page on March 3, U.S. President Donald Trump stated, “Effective IMMEDIATELY, I have ordered the United States Development Finance Corporation (DFC) to provide, at a very reasonable price, political risk insurance and guarantees for the Financial Security of ALL Maritime Trade, especially Energy, traveling through the Gulf”.

“This will be available to all Shipping Lines. If necessary, the United States Navy will begin escorting tankers through the Strait of Hormuz, as soon as possible,” he added.

“No matter what, the United States will ensure the FREE FLOW of ENERGY to the WORLD. The United States’ ECONOMIC and MILITARY MIGHT is the GREATEST ON EARTH — More actions to come. Thank you for your attention to this matter,” he continued.

In an oil flash note sent to Rigzone by Kaneva on Tuesday morning, analysts at J.P. Morgan warned that, if the Strait of Hormuz does not reopen within 21 days, upstream shut‑ins could begin.

“In the interim, the United States can mitigate transport risks through naval protection and insurance or guarantees for commercial shipping, and the Trump administration is expected to unveil a plan on Tuesday to address rising oil prices,” that note added.

This J.P. Morgan flash note stated that major marine insurers had withdrawn war-risk coverage, “making vessel transit through the Gulf contractually and commercially unviable”.

“The coordinated response across insurers, shipowners and charterers has resulted in a sharp decline in tanker movements, effectively stopping oil and LNG flows through the strait,” the note pointed out.

The DFC describes itself on its website as the international investment arm of the U.S. Government.

“We partner with the private sector to mobilize capital for strategic investments around the world,” the DFC site states.

“Our projects foster economic development, support U.S. interests, and deliver returns to American taxpayers,” it adds.

To contact the author, email andreas.exarheas@rigzone.com