Strong currency puts pressure on Taiwan life insurersMay 26 2017 by InsuranceAsia News Staff
As Taiwanese life insurers venture offshore in search for higher yields, they are also exposing themselves to unfavourable capital and currency market fluctuations, Fitch Ratings said in a new report.
Taiwan’s interest rates have been low recently.
The one-year deposit rate dropped to 1% from 1.2% between 2015 and March 2017.
The strong appreciation of the Taiwan dollar against the US dollar is not seen to help life insurers at all, profitability-wise.
Instead, it could put pressure on their capitalization, although they have resorted to control mechanisms like currency swaps and proxy hedging.
To minimise risk, they may also release foreign-exchange volatility reserves.
As of March this year, overseas investments took up 64% of the sector’s invested assets.
Non-life players, for their part, enjoyed sound capital buffers to endure the investment volatility and possible catastrophe losses.
Their combined equity-to-assets ratio as of end-March this year stood at 32%.
- August 9
It will limit investments in companies that derive more than 30% of their business from burning coal.
- July 16
Investment arm Riverhead Capital is funding the leasing services and leasing asset management specialist.
- June 20
The country's financial regulator may increase the quota for local insurers that invest in innovative domestic industries.
- June 15
Rising rates benefit dollar bond investors in the long run but signal growing policy divergence in Asia.