Taiwan’s life insurers are issuing US dollar bonds at a record pace to build capital buffers and help them avoid adding to currency mismatch risks that have triggered billions in losses.
Taiwanese insurance companies have sold more than US$1.8 billion of subordinated debt in Taiwan and Singapore so far this year, closing in on last year’s record, according to Bloomberg-compiled data.
Despite it being costlier to raise funds in the greenback, the insurers are likely to step up the pace next year to comply with higher capital requirements, and better match duration and currency imbalances of assets and liabilities.
Photo: CNA
“There could be an increase in issuance next year compared to this year, as there may be some new names coming to the market,” said Nicholas Yap, head of Asia credit desk analysts at Nomura Holdings Inc in Singapore.
The dramatic spike of the New Taiwan dollar in May has drawn heightened scrutiny on insurers, who hold US$700 billion in foreign assets, as exchange rate volatility and rising hedging costs weigh on profitability, and raise concerns about their financial health.
This month, Cathay Life Insurance Co (國泰人壽) approved up to US$1 billion in new debt to be issued in Singapore within a year. Taiwan Life Insurance Co (台灣人壽) completed setting up its offshore borrowing unit, while E.Sun Financial Holding Co (玉山金控) said the insurer it is acquiring plans to issue at least US$100 million of dollar bonds next year.
Taiwan’s US$1 trillion insurance industry needs to build up assets ahead of a sectorwide shift to an accounting regime with stricter financial standards. The new rules are set to take effect in January.
“Beyond the major players, mid-sized insurers with stable earnings should also retain flexibility to raise funds via US dollar-denominated subordinated debt over the coming years,” said Terrence Wong (王長泰), a senior director covering Asia Pacific insurance ratings at Fitch Ratings in Hong Kong.
Taiwan’s regulator only opened the overseas fundraising channel for the insurers in March last year, and companies have since been working to establish the necessary processes to issue bonds abroad.
The vast majority of the insurers’ US dollar notes have been sold in Singapore to foreign buyers — including asset managers, pensions and retirement funds — through special-purpose vehicles.
“The bonds have attracted foreign investors with their reasonably attractive yields,” said Serene Hsieh (謝雅瑛), a credit analyst at Taiwan Ratings Corp (中華信評). “These are also relatively new names in the global bond market, offering additional diversification for investors.”
The US dollar bonds could in turn help Taiwan’s insurers broaden their investor mix — although at a cost. Since 2023, the benchmark 10-year US Treasury yield has consistently stood at least 2 percentage points above the comparable Taiwanese counterpart. In other words, borrowing in NT dollars is much cheaper.
Currency headwinds have also weighed on some of Taiwanese insurers’ US dollar bonds, particularly those issued by smaller and weaker firms, which are trading at relatively wider spreads, Yap said.
“In an environment where Asia credit spreads are trading quite tight, this stands out,” he said.
Shiina Ito has had fewer Chinese customers at her Tokyo jewelry shop since Beijing issued a travel warning in the wake of a diplomatic spat, but she said she was not concerned. A souring of Tokyo-Beijing relations this month, following remarks by Japanese Prime Minister Sanae Takaichi about Taiwan, has fueled concerns about the impact on the ritzy boutiques, noodle joints and hotels where holidaymakers spend their cash. However, businesses in Tokyo largely shrugged off any anxiety. “Since there are fewer Chinese customers, it’s become a bit easier for Japanese shoppers to visit, so our sales haven’t really dropped,” Ito
INNOCENT? The High Prosecutors’ Office opened a case and ordered a search of Lo’s residences, while Intel claimed he was welcomed back to ‘revitalize’ the company The Ministry of Economic Affairs yesterday dismissed Intel Corp’s comment questioning evidence in the case surrounding alleged leaks of trade secrets from Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), saying that all allegations must be determined by judicial authorities rather than by any one party. Relevant evidence should be determined through the prosecutors’ investigation and the court’s verification, and “cannot be concluded based on one side’s claims,” Minister of Economic Affairs Kung Ming-hsin (龔明鑫) told reporters before the ministry’s weekly business meeting. As the case involves national security and core technologies, the High Prosecutors’ Office has launched an investigation, and the government will
ALLEGATION: When he retired from TSMC in Juiy, former executive vice president Lo Wei-jen did not reveal plans to join competitor Intel, TSMC said Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday said it had filed a lawsuit against former executive vice president Lo Wei-jen (羅唯仁) claiming he contravened the terms of his employment, amid suspicion that Lo stole TSMC’s trade secrets and leaked them to its US competitor, Intel Corp. In a statement, TSMC said it had filed a suit against Lo at the Intellectual Property and Commercial Court, citing contraventions of the Trade Secrets Act (營業秘密法), the terms of his employment, and confidentiality and noncompete agreements he had signed. The company said it hired Lo as vice president in 2004, and he was
SPRAWLING COVERAGE: Amazon balances ownership with flexibility, leveraging third-party options if they have additional capacity or reach, a spokesperson said Amazon.com Inc’s data center operation is much larger than commonly understood, totaling more than 900 facilities in more than 50 countries, documents reviewed by Bloomberg and investigative Web site SourceMaterial showed. Amazon Web Services (AWS) is best known for sprawling data center hubs in Virginia and Oregon, but those enormous complexes, which the company owns or operates through long-term leases, do not account for its full footprint. The cloud unit also stashes server racks in hundreds of so-called colocation facilities, renting space that as of last year provided about one-fifth of the computing power at Amazon’s disposal, the documents showed. Called “colos”
RSS