India has taken a series of measures to reduce its dependence on foreign maritime insurance amid ongoing disruptions at the Strait of Hormuz, a critical shipping chokepoint. Despite a fragile ceasefire and attempts to reopen shipping routes secured by Iranian transit fees and security around Larak Island, insurers have withheld or sharply increased war-risk premiums due to escalating geopolitical tensions. These premiums have surged from typical levels of 0.2 to 0.3 percent of cargo value to nearly ten times the insured value, creating a significant cost barrier for traders.

As the world’s third-largest oil importer—with over 90 percent of its crude arriving by sea—India faces acute structural vulnerabilities in its shipping insurance framework. In response, the government has implemented a $1.5 billion sovereign guarantee scheme, complemented by a $300 million industry claims pool and a ₹1,000 crore war-risk fund. These efforts are designed to act as a backstop, sustaining essential energy imports and maintaining trade continuity in the face of reduced access to international insurance markets.

India’s reliance on international Protection and Indemnity (P&I) clubs—mutual insurance organizations central to global maritime coverage—remains a key challenge. These clubs, primarily based in Western countries but also including China, provide extensive liability and reinsurance services. Their global capital reserves, actuarial expertise, and broad risk diversification enable them to absorb large-scale maritime risks, credibility that India currently lacks domestically. Indian insurers have seen a growing trend of ceding risks abroad due to limited underwriting capacity and fragmented shipping operations, intensifying exposure to geopolitical events and financial shocks.

To address these limitations, India aims to gradually develop its own maritime insurance ecosystem. The immediate focus is on strengthening domestic underwriting capacity through institutions like GIC-Re, which would allow for higher risk retention. Parallel initiatives include establishing a national war-risk insurance pool to distribute high-risk exposures across multiple insurers, supported by sovereign guarantees to shield them from catastrophic losses. Regulatory reforms may require partial domestic retention of marine risks, helping build expertise and reduce foreign currency outflows, while partnerships with global reinsurers remain critical to accessing capital and maintaining credibility.

India’s strategy draws inspiration from the historical evolution of P&I clubs, particularly the UK model where mutually owned associations expanded incrementally to build deep capital and global interlinkages. The government envisions a phased development of a regional risk-sharing structure—referred to as the Hydra Insurance Company—featuring multiple layers of pools that spread liabilities across different tiers, bolstered by sovereign support and international cooperation. Collaboration with maritime economies such as the UAE, Indonesia, and Singapore is also seen as vital to scaling this approach.

Broader maritime sector development is integral to the insurance strategy. Expanding shipbuilding, fleet ownership, trade volumes, and port infrastructure will create a stronger domestic base to support a viable P&I framework. Policy reforms aimed at easing ship registration and encouraging coastal shipping are expected to deepen the cargo and vessel ownership pool, essential for sustainable insurance capacity. Specialized marine underwriting skills and increased participation in pooled risk mechanisms will be required, alongside an expanded role for reinsurers like GIC-Re.

While India’s current measures enhance short-term resilience, experts emphasize the need for a gradual, carefully calibrated buildout of sovereign maritime insurance capabilities. Drawing parallels to China’s multi-decade development of its P&I system, officials suggest that the trajectory toward sovereignty will be incremental. The proposed Hydra Strategy, with its emphasis on layered and interconnected institutions integrated with maritime security analytics, aims to create a robust framework capable of withstanding future disruptions and securing India’s economic interests in a volatile global shipping environment.