The Centre has approved a sovereign guarantee-backed maritime insurance pool worth ₹12,980 crore to support external trade amid war-related disruptions and economic sanctions.

The pool ‌will operate for 10 years and can be extended by a further five years, information and broadcasting minister Ashwini Vaishnaw said, announcing the decision of the Union Cabinet.

According to the government, there was a need for a domestic maritime risk coverage pool to maintain sovereignty and continuity of trade in the face of withdrawal of coverage due to sanctions or due to geopolitical tensions.

With the Iran war waging and the Strait of Hormuz emerging as a major chokepoint for maritime trade with ships coming under attack, several major reinsurers have either withdrawn cover or sharply raised premiums, leaving the industry with limited reinsurance support.

To mitigate the challenges, the government-backed pool will support Indian flagged or controlled vessels or those headed to or starting from India.

The pool would cover all maritime risks like hull and machinery, cargo and war risk. The policies will be issued by insurers that are pool members, using the combined underwriting capacity of the pool, which would be around ₹950 crore, the government said.

The pool will help to manage liability insurance locally, tailored to Indian shipping conditions and regulatory requirements, develop specialised marine underwriting, claims management and legal expertise within India, it added.

The mechanism will ensure that Indian trade continues to have access to affordable insurance for vessels carrying cargo from any international origin to Indian ports and vice versa, even when transiting volatile maritime corridors.