Lloyd’s cuts down on Taiwan cover amidst China invasion fears

Several possible scenarios for the next decade outlined

Lloyd’s cuts down on Taiwan cover amidst China invasion fears

Insurance News

By Kenneth Araullo

Lloyd’s underwriters, alongside carriers, are cutting down on coverage for risks in Taiwan as well as raising rates over fears of possible military actions by China.

According to several insiders, insurers are on high alert following the Russian invasion of Ukraine last year, an event which blindsided the industry and led to exclusions and increased rates for both countries.

Reuters reports that a similar situation with Taiwan will make it more difficult and expensive to do business there. Taiwan is the world’s largest advanced semiconductor chip maker, and therefore plays a crucial role in the global economy. The US director of National Intelligence said that a halt in chip production stemming from a Chinese invasion could lead to $1 trillion per year in global economic losses.

Canopius head of trade and political risk Crispin Hodges said that availability of cover for Taiwan is now tighter as Lloyd’s insurers have become more focused on how much risk they are exposed to from ships in ports in a possible conflict zone.

“From a political risk standpoint, it's a constant challenge and there is an underlying murmur of concern that's there on a daily basis,” Hodges said.

In January, Lloyd’s asked member syndicates to identify potential exposure to realistic disaster scenarios relating to a possible conflict in Taiwan in insurance lines including marine, aviation, and political risk. These were drawn up by broker CHC Global, who confirmed its veracity to Reuters but declined to comment further.

The scenarios ranged from a naval quarantine of Taiwan by China to China seizing outlying Taiwanese islands, and finally, a possible Chinese invasion of Taiwan. These scenarios could play out in the next decade, CHC said.

“Lloyd's regularly asks market participants to model for plausible, but hypothetical scenarios to assess their potential impact on our market,” a Lloyd's spokesperson said. “This is an important part of protecting our customers against the kind of external shocks seen in recent years and ensuring our market is ready to respond in a range of scenarios.”

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