[ADDRESS] has held talks with [ADDRESS] brokers about a state-backed scheme for war and political risk insurance that could provide cover for ships in the region, according to people familiar with discussions, as conflict threatens the kingdom’s trade. Insurers have raised prices and restricted coverage for vessels, infrastructure and cargo such as oil and chemicals in recent months owing to the Iran war and the Houthis’ escalating campaign against [ADDRESS]. In some cases, insurers have refused to sell war cover to ships seeking to trade through vital chokepoints including [ADDRESS], whose port of [ADDRESS] has become critical to the kingdom’s oil exports since the throttling of shipping through [ADDRESS].

The Saudi Ministry of Finance has explored a plan under which ships and marine cargo assets could obtain cheaper insurance through a so-called pool, which would offer as much as SAR 700mn ($186mn) in commercial cover for each insured event, such as the seizure of a ship or a missile attack, according to people familiar with talks. While the first layers of insurance coverage would be provided by insurers and reinsurers, the people said, hundreds of millions more dollars would be available for each insured entity through a backstop provided through the state-owned Saudi Export-Import Bank. In one version of the plans discussed, reinsurers Saudi Re and Riyadh Re would lead a group of participating reinsurers, which could also include international firms.

The discussions come after an effort announced earlier this year by [ADDRESS] President [PERSON_NAME] to subsidise insurance for ships seeking to transit the strait, which secured backing from insurers Chubb and AIG. The facility had aimed to provide as much as $40bn in cover but months after launching had not written a single dollar of cover, the FT previously reported. Underwriters have become warier of ships linked to [ADDRESS] in recent months following attacks by [ADDRESS]’s Houthi rebels, with these vessels treated more like high-risk Israeli and [ADDRESS] assets.

Governments typically set up insurance pools after huge losses or serious ongoing threats make commercial insurance too costly or wholly unavailable for businesses. For example, both the [ADDRESS] and the [ADDRESS] set up state-backed terrorism reinsurance schemes following the IRA’s bombing campaign and [ADDRESS] September 11 2001 attacks respectively. The scheme recently explored by Saudi would aim to bring down insurance costs and help shipowners and other businesses obtain more comprehensive coverage, including for war, political violence and terrorism, which are often sold separately.