Insurers withdrawing war-risk coverage can have profound impacts on global trade, as demonstrated by a significant drop in tanker traffic through the Persian Gulf. According to Meng Kit Tang, markets closed before missiles fired; in 2026, the number of transits fell from 138 to fewer than eight within days following the withdrawal of insurance coverage. This sharp decline highlights how commercial lawfare can effectively disrupt maritime trade without direct military engagement.
The mechanism works through a series of economic pressures that force ships to divert or cease operations. Once insurers restrict or withdraw coverage, charter parties and loan covenants come into play. The strategic implications are stark: the People’s Republic of China (PRC) does not need to win command of the sea to interrupt Taiwan’s trade; it only needs to make insurers hesitant about covering risks in sensitive areas like the Taiwan Strait.
Strategic Implications and Deterrence
The case study from the Persian Gulf underscores that a quarantine of Taiwan, or similar actions, can begin with paperwork rather than physical interdiction. The PRC can create doubt through legal ambiguities, such as routine inspections by coast guard vessels and maritime militia. These operations appear under the guise of safety or customs enforcement, but they effectively shift the risk perception among insurers and ship operators.
According to Meng Kit Tang, once protection and indemnity clubs narrow coverage through higher premiums and exclusions, it is the charter parties and mortgage covenants that take over. Shipowners are compelled to withdraw their vessels because their contracts demand it, their insurers insist on it, and lenders will not tolerate the exposure.
The strategic implications extend beyond specific regions. They suggest that deterrence in maritime trade must be constructed through the ledgers and liability clauses that determine whether merchant vessels are willing to sail at all. This approach highlights a subtle yet potent form of commercial lawfare that can effectively disrupt supply chains without overt military action.