Global insurers refuse to underwrite Taiwan semiconductor fabs against Chinese military risk

Technology — March 24, 2026

Major international insurance syndicates, including Lloyd's of London underwriters and Munich Re, have declined to provide coverage for Taiwan Semiconductor Manufacturing Company's fabrication facilities against the risk of damage arising from Chinese military action — a decision that exposes a fundamental vulnerability in the world's most critical supply chain, according to industry and government sources.

TSMC's Taiwan fabs produce approximately 90% of the world's most advanced semiconductors and virtually all chips below 3 nanometres that are used in high-performance computing, artificial intelligence infrastructure, consumer electronics, and defence systems. The absence of war risk insurance means that the destruction or seizure of these facilities in a Taiwan conflict would impose trillions of dollars in uninsured losses on global technology companies.

The insurance gap was revealed in a Lloyd's of London market review published in March 2026 that assessed the insurability of critical infrastructure concentrated in geopolitically exposed regions. The review found that 'no commercially viable risk model' could support coverage of TSMC's Taiwan facilities at the scale required.

TSMC has been accelerating the construction of overseas fabs in Arizona, Japan, and Germany under political and commercial pressure to diversify its manufacturing footprint. However, the Arizona Fab 21, which began volume production of 4-nanometre chips in 2025, will not produce the most advanced 2-nanometre processes until at least 2027, and the overseas fabs collectively represent a small fraction of TSMC's Taiwan capacity.

The US Commerce Department said it viewed the insurance gap as a national security concern and was in discussions with the Treasury Department about whether the US government should play a role in providing de facto risk backstop for critical semiconductor capacity located in allied nations.

Intel's US-based fabs and Samsung's Korean facilities represent the only credible alternative high-volume production of advanced chips, and both remain well behind TSMC in the most advanced process nodes, according to analysts at Bernstein Research.

The episode underscored a broader challenge for global supply chain risk management: the concentration of indispensable production in geopolitically exposed locations has created systemic risks that markets cannot absorb through normal commercial insurance mechanisms.