Read The Diplomat, Know The Asia-Pacific
Taipei’s energy supply is secured for now, but it faces a separate concern of whether insurers will cover the ships that are needed to deliver it.
The ongoing crisis in the Strait of Hormuz has been described as the largest disruption to world energy supplies since the 1970s. As governments scramble to reopen a waterway that carries around 33,000 vessels a year, a strategic waterway that hosts 2.8 times as many vessels must also be considered. The Taiwan Strait is one of the busiest marine corridors in the world.
Taiwan, like much of East Asia, has felt the effects of the Hormuz closure firsthand, and has moved quickly to secure its near-term energy supply through spot market purchases and new long-term contracts with American suppliers. However, securing the fuel and ensuring it can arrive are two different challenges.
The Hormuz crisis points out that insurance markets are quick to splinter when a vital maritime corridor comes under pressure. War risk premiums have surged and remain one of the most consequential obstacles in facilitating the flow of energy. As government backstops emerge from the United States, India, and South Korea, Taiwan ought to prepare contingency plans to respond to potential marine insurance market disruptions.
