Taiwan’s life insurers have refrained from aggressively building up their reserve to protect against foreign exchange volatility introduced in March last year, reflecting limited desires and flexibility to alter hedging strategies, according to Taiwan Ratings Corp (中華信評), Standard & Poor’s local arm.
The reserve pool accounts for a mere 0.38 percent of domestic life insurers’ overseas investments as of September last year, down from 0.5 percent in March the same year, when they were first allowed to set aside the fund, the ratings agency said.
“Until the fund grows substantially, it can provide only marginal support to insurers’ bottom lines,” Taiwan Ratings’ credit analyst Patty Wang (王珮齡) said, attributing the drop in reserves to rapid growth in overseas investments.
The reserve fund is intended to counter the negative impact of severe foreign exchange fluctuations on their assets.
The slow build-up of reserves indicates that domestic life insurers may keep their prudent hedging strategies unchanged in the coming one to two years, Wang said, adding that they are generally exposed to higher foreign exchange risks than regional peers because of their large overseas exposure and higher rate of currency-mismatch problems.
“We don’t expect the pool to expand rapidly in the near future unless insurers are willing to sacrifice their earnings to make additional provisions,” Wang said.
The small reserve pool restricts hedging flexibility and life insurers are unlikely to lower their hedged positions drastically to save hedging costs in the absence of a strong foreign exchange buffer, Wang said.
Life insurers would have to substantially increase their foreign exchange reserves if they want to more effectively cushion against foreign exchange losses, Wang said.
Consequently, the use of the reserve may not trigger rating actions in the coming one to two years even though drastic changes in foreign exchange risk-taking behavior will impact credit profiles, Taiwan Ratings said.
The agency has assigned a negative rating outlook on local life insurers because of the sector’s volatile capitalization and lower earnings in comparison with Asian peers.
Intel Corp chief executive officer Lip-Bu Tan (陳立武) is expected to meet with Taiwanese suppliers next month in conjunction with the opening of the Computex Taipei trade show, supply chain sources said on Monday. The visit, the first for Tan to Taiwan since assuming his new post last month, would be aimed at enhancing Intel’s ties with suppliers in Taiwan as he attempts to help turn around the struggling US chipmaker, the sources said. Tan is to hold a banquet to celebrate Intel’s 40-year presence in Taiwan before Computex opens on May 20 and invite dozens of Taiwanese suppliers to exchange views
Application-specific integrated circuit designer Faraday Technology Corp (智原) yesterday said that although revenue this quarter would decline 30 percent from last quarter, it retained its full-year forecast of revenue growth of 100 percent. The company attributed the quarterly drop to a slowdown in customers’ production of chips using Faraday’s advanced packaging technology. The company is still confident about its revenue growth this year, given its strong “design-win” — or the projects it won to help customers design their chips, Faraday president Steve Wang (王國雍) told an online earnings conference. “The design-win this year is better than we expected. We believe we will win
Chizuko Kimura has become the first female sushi chef in the world to win a Michelin star, fulfilling a promise she made to her dying husband to continue his legacy. The 54-year-old Japanese chef regained the Michelin star her late husband, Shunei Kimura, won three years ago for their Sushi Shunei restaurant in Paris. For Shunei Kimura, the star was a dream come true. However, the joy was short-lived. He died from cancer just three months later in June 2022. He was 65. The following year, the restaurant in the heart of Montmartre lost its star rating. Chizuko Kimura insisted that the new star is still down
While China’s leaders use their economic and political might to fight US President Donald Trump’s trade war “to the end,” its army of social media soldiers are embarking on a more humorous campaign online. Trump’s tariff blitz has seen Washington and Beijing impose eye-watering duties on imports from the other, fanning a standoff between the economic superpowers that has sparked global recession fears and sent markets into a tailspin. Trump says his policy is a response to years of being “ripped off” by other countries and aims to bring manufacturing to the US, forcing companies to employ US workers. However, China’s online warriors
RSS