Taiwan’s insurance companies are more vulnerable to market volatility triggered by US tariffs due to their smaller capital buffers, while the nation’s banks remain well-capitalized and able to absorb potential economic shocks, two major international ratings agencies said.
Key equity markets across the Asia-Pacific region have fallen by more than 10 percent on average since US President Donald Trump announced sweeping tariff hikes on April 2, Moody’s Ratings said.
The sweeping import tariff regime is credit negative for regional insurers, it said, citing the immediate impact of heightened capital market volatility, as well as medium-term risks such as weaker insurance demand and higher claims costs resulting from slower economic growth and inflationary pressures.
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Among the markets, insurers in Taiwan are the most exposed to market volatility, while Chinese insurers could face heightened negative spread risks, as Beijing’s central bank responds with easing policies, Moody’s Ratings said.
Taiwanese insurers are particularly vulnerable to falling equity prices due to their relatively lower capital buffers, the agency said.
Several major life insurers have already reported a 15 percent decline in unrealized capital gains during the first quarter — a figure that could worsen this month amid continued global stock market turbulence.
In China, regulators have encouraged life insurers to boost their equity holdings to help stabilize the market.
However, Moody’s cautioned that this approach could increase insurers’ overall equity exposure, making their capital positions and earnings more sensitive to market volatility.
In response to the volatility, the Financial Supervisory Commission has asked domestic life insurers to assess their cash and debt positions, and ensure adequate liquidity to protect the interests of policyholders and avoid a potential liquidity trap.
The commission is especially monitoring whether a wave of policy cancelations or terminations follows the stock market slump.
So far, it has not observed any significant or abnormal spike in cancellations, but said it would continue to monitor the situation as uncertainty lingers.
In contrast, the nation’s banks remain sufficiently capitalized and are in a strong position to absorb potential economic shocks over the next 12 months, which carries great importance this year, Taiwan Ratings Corp (中華信評) said.
“Banks could increasingly need this buffer this year because strong ties between Taiwan’s economic performance and US economic policies could weigh on the sector’s performance,” the local arm of S&P Global Ratings said.
Taiwan’s growing reliance on the US economy exposes the domestic economy to higher risk of US policy changes, it said.
The US is Taiwan’s second-largest trade partner, accounting for the bulk of shipments of electronics used in smartphones and artificial intelligence applications.
This dependence could impact Taiwanese households and businesses — and potentially its banking sector — if the US steeply raises trade barriers, Taiwan Ratings said.
Credit losses could increase in weaker sectors of the economy amid rising economic uncertainties, it said.
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