Taiwanese insurers are facing difficult questions about the damage of recent swings in the New Taiwan dollar. Regulators might have a partial solution: letting firms change how they calculate the value of foreign currency assets.
The Financial Supervisory Commission (FSC) is considering allowing insurers to use six-month average exchange rates when they calculate risk-based capital in their semiannual reports, a shift from the current system where insurers use exchange rates on the final day of reporting.
The change could ease pressure on the US$1.2 trillion insurance sector, whose huge exposure to foreign assets came into the spotlight earlier this month after a rapid surge in the NT dollar against the greenback.
Photo: Wang Yi-sung, Taipei Times
“This will offer some breathing space for selected lifers where risk-based capital is close to the regulatory requirement,” Societe Generale SA Greater China economist Michelle Lam (林雪潔) said.
Still, the currency was likely to appreciate further against the greenback, meaning insurers would not entirely be spared the need to hold more capital, she added.
The change is still being considered by the commission, but FSC Chairman Peng Jin-lung (彭金隆) told lawmakers yesterday that the regulator was “inclined to agree with the proposal from the life insurance association” to switch to six-month exchange rates for the calculation.
“We’ll prioritize stability in the market and a smooth transition to the new capital requirements rules in 2026,” he said, adding that the regulator would make a decision on easing the rule by the end of next month.
Peng told a news conference on Tuesday that Taiwan’s insurance companies have enough cash on hand, and would not have liquidity issues.
The NT dollar’s more than 8 percent surge against the greenback over the past month has forced local insurers to either pay up to hedge against further currency gains or face the risk of growing paper losses on their approximately US$780 billion in foreign assets, most of which are in US dollars.
Local insurers have been divided on how best to respond to the currency volatility.
Taiwan Life Insurance Co (台灣人壽) chairman Paul Hsu (許舒博) in an interview last week said that the currency swings were causing him sleepless nights.
His firm is considering diversifying its investments across different currencies and issuing more US dollar-denominated policies to lower the risk of currency mismatches, he said.
Fitch Ratings on Friday last week revised its outlook for the life insurance sector to “deteriorating” from “neutral,” adding that exchange rate movements might affect Taiwanese life insurers’ capitalization and earnings.
Insurers are likely to hedge more of their foreign currency assets in response to the recent volatility, Fitch said.
The NT dollar yesterday edged 0.14 percent higher against the greenback to close at NT$29.910 in Taipei trading.
ENERGY ISSUES: The TSIA urged the government to increase natural gas and helium reserves to reduce the impact of the Middle East war on semiconductor supply stability Chip testing and packaging service provider ASE Technology Holding Co (日月光投控) yesterday said it planned to invest more than NT$100 billion (US$3.15 billion) in building a new advanced chip testing facility in Kaohsiung to keep up with customer demand driven by the artificial intelligence (AI) boom. That would be included in the company’s capital expenditure budget next year, ASE said. There is also room to raise this year’s capital spending budget from a record-high US$7 billion estimated three months ago, it added. ASE would have six factories under construction this year, another record-breaking number, ASE chief operating officer Tien Wu
The EU and US are nearing an agreement to coordinate on producing and securing critical minerals, part of a push to break reliance on Chinese supplies. The potential deal would create incentives, such as minimum prices, that could advantage non-Chinese suppliers, according to a draft of an “action plan” seen by Bloomberg. The EU and US would also cooperate on standards, investments and joint projects, as well as coordinate on any supply disruptions by countries like China. The two sides are additionally seeking other “like-minded partners” to join a multicountry accord to help create these new critical mineral supply chains, which feed into
For weeks now, the global tech industry has been waiting for a major artificial intelligence (AI) launch from DeepSeek (深度求索), seen as a benchmark for China’s progress in the fast-moving field. More than a year has passed since the start-up put Chinese AI on the map in early last year with a low-cost chatbot that performed at a similar level to US rivals. However, despite reports and rumors about its imminent release, DeepSeek’s next-generation “V4” model is nowhere in sight. Speculation is also swirling over the geopolitical implications of which computer chips were chosen to train and power the new
TECH WINNERS: Taiwan and South Korea reported robust trade, which suggests that they have critical advantages in the rapidly expanding AI supply chain, an official said Exports last month surged to a new high, as booming demand tied to artificial intelligence (AI) infrastructure fueled shipments of advanced technology components, underscoring the nation’s pivotal role in the global semiconductor supply chain. Outbound shipments climbed to US$80.18 billion, the highest ever for a single month, rising 61.8 percent from a year earlier and marking the 29th consecutive month of growth, the Ministry of Finance said yesterday. “The surge was driven primarily by global investment in AI infrastructure,” Department of Statistics Director-General Beatrice Tsai (蔡美娜) said. The mass production of next-generation AI computing systems has accelerated procurement across the semiconductor supply
RSS