The total first-year premiums (FYPs) paid on foreign-currency insurance policies rose 26 percent annually to NT$578.23 billion (US$19.06 billion) for the first 11 months of last year, pointing to a strong uptake of such policies, the Financial Supervisory Commission (FSC) said last week.
Investment-linked products accounted for 39.14 percent of total FYPs of foreign-currency policies and saw FYPs surge 61 percent annually to NT$226.3 billion, commission data showed.
In comparison, total FYPs generated from traditional foreign-currency life insurance policies grew 11 percent to NT$351.92 billion, with their market share standing at 60.86 percent, the data showed.
US dollar-denominated policies dominated the market for foreign-currency products with an 85 percent share, while their total FYPs advanced 21 percent annually to US$16.05 billion during the 11-month period, the data showed.
Chinese yuan-denominated policies ranked second, with a market share of about 7.6 percent, while their total FYPs increased 952 percent to 9.61 billion yuan (US$1.42 billion), the data showed.
Policies denominated in Australian dollar saw total FYPs drop 41 percent to A$1.32 billion (US$953.30 million) due to a weakening exchange rate against the US dollar, the data showed.
Foreign-currency products have become more popular with local buyers, who consider foreign currencies more stable than the New Taiwan dollar, an FSC official said.
However, the assumption might prove wrong, as the Australian dollar has depreciated sharply over the past few years, the official said.
Local insurers, who booked hedging losses of NT$507.5 billion in the first 10 months of last year, would benefit from the foreign-currency products, as they do not need to worry about foreign-exchange risk, the commission said.
To boost sales, insurance companies have tended to offer higher interest income on foreign-currency products than regular policies, it said.
However, buyers still need to pay attention to foreign exchange rates, it added.
The US dollar should weaken this year as the US Federal Reserve hikes interest rates more slowly, Standard Chartered Bank managing director for wealth management Cindy Fu (傅敏儀) said on Thursday last week.
The British pound could see more volatility due to uncertainty surrounding the UK’s withdrawal from the EU and is expected to trade at US$1.20 to US$1.43 this year, Fu said.
There is a slim chance that China would allow the yuan to weaken further against the US dollar and breach the highly symbolic level of 7 yuan, she said, adding that the US dollar-yuan exchange rate should remain at about 6.8 yuan this year.
The Australian dollar is not expected to advance this year, as the Reserve Bank of Australia appears reluctant to raise interest rates and it should hover at about US$0.68 this year, Fu said.
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