Domestic life insurers are expected to see an easing of foreign exchange-related pressures as the pace of appreciation of the New Taiwan dollar has slowed these days, the Financial Supervisory Commission said.
As of the end of May, life insurers accumulated NT$97 billion (US$3.18 billion) in foreign exchange-related losses as the New Taiwan dollar rose 6.74 percent against the US dollar.
By contrast, cumulative foreign exchange losses were tallied at NT$83.7 billion in the first four months of this year, with the commission attributing the NT$13.3 billion monthly gain to life insurers’ decision to take profits from bond positions and book foreign exchange losses during the period.
TURNAROUND
However, pressures are beginning to ebb as the local currency’s gains against the US greenback retreated to 5.74 percent as of yesterday.
Life insurers posted pre-tax earnings of NT$5.3 billion at the end of May, after posting losses of NT$4.3 billion in April.
At the same time, life insurers’ unhedged foreign exchange exposures have declined steadily since the beginning of this year, from NT$227.1 billion in January and NT$189.1 billion in February, to NT$24.1 billion in May, data from the commission showed.
During the first five months of the year, life insurers also reduced their reliance on foreign exchange valuation reserves, with charges falling from NT$13.6 billion in January to just NT$100 million in May, the data showed.
RESERVES
Still, the commission warned that life insurers’ pools of reserves have seen a rapid depletion, having fallen to NT$16.9 billion, from NT$44.1 billion at the end of last year.
In particular, 10 life insurers now have less than 20 percent of their initial reserves intact, triggering rules that prohibit further charges before reserves are replenished.
Separately, following the arrival of Apple Inc’s official retail store in Taiwan, the commission said it needs to verify whether the US technology giant’s AppleCare+ add-on package for its hardware products are able to be sold, as the arrangement might be classified as an insurance product subject to its jurisdiction.
The commission said that AppleCare+ and other arrangements currently offered by local telecoms carriers that offer product replacements in the event of mishaps and damage might be considered an insurance product, which can only be sold by salespeople with the requisite licenses and certifications.
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