Nan Shan Life Insurance Co’s (南山人壽) exposure to Colombia is NT$62.91 billion (US$2 billion), Financial Supervisory Commission (FSC) Chairman Peng Jin-long (彭金隆) said yesterday, as geopolitical tensions in Latin America drew legislative scrutiny.
Peng made the remarks at a meeting of the Legislative Yuan’s Finance Committee after US President Donald Trump threatened possible military action against Colombia following a US raid in Caracas last week that led to the capture of deposed Venezuelan president Nicolas Maduro.
Nan Shan Life’s exposure to Venezuela stood at NT$13.55 billion, Peng said.
Photo: Tu Chien-jung, Taipei Times
The insurer’s Venezuela-related investments were mainly in AA-rated bonds issued by international development banks, he said.
Democratic Progressive Party (DPP) Legislator Kuo Kuo-wen (郭國文) said during the meeting that life insurers had been reluctant to invest domestically, not only due to limited investment options, but also because higher-risk overseas investments offer higher guaranteed returns.
That has led to excessive hedging and rising costs, Kuo said.
As of November last year, Taiwan’s banking sector had total exposure of NT$14.51 billion to Venezuela, with one institution accounting for NT$13.55 billion, Kuo cited data as showing.
Total bank exposure to Colombia was NT$816 million, with the largest single exposure at NT$392 million.
In contrast, Taiwan’s insurance sector had no exposure to Venezuela, while its total exposure to Colombia was NT$138.51 billion, with one insurer alone accounting for NT$62.91 billion.
Kuo asked the FSC head whether the insurer with NT$62.91 billion in exposure was Nan Shan Life, which Peng confirmed.
Under the Financial Holding Company Act (金融控股公司法), firms are required to disclose their exposure amounts, the legislator said.
Major financial groups such as Fubon Financial Holding Co (富邦金控), Cathay Financial Holding Co (國泰金控) and CTBC Financial Holding Co (中信金控) each reported exposure of NT$18.7 billion, NT$18.4 billion and NT$16.3 billion respectively, none of which matched the largest figure, he added.
When asked whether the FSC would require insurers to gradually reduce such exposure, Peng said the issue should be addressed through systemic reforms rather than on a case-by-case basis.
The regulator would review rules governing non-investment-grade assets, including investment proportions and limits, from risk and return perspectives, he said.
Separately, the US dollar’s 12-month non-deliverable forward (NDF) points against the New Taiwan dollar this week turned positive for the first time in more than nine years, a sign that hedging costs have significantly eased following the FSC’s loosening of foreign exchange accounting rules for Taiwanese insurers from Thursday last week.
The gauge had fallen below zero and hit the lowest level on record in June last year.
Insurers typically sell the US dollar-NT dollar currency pair through the offshore NDF market to hedge against a weakening greenback.
The 12-month NDF points yesterday morning stood at 0.005 in Asia.
The shift in hedging costs reflects the massive scale of the industry’s foreign holdings.
About NT$15.2 trillion of insurers’ assets are exposed to exchange-rate risk, based on regulatory calculations that exclude foreign currency-denominated policies. About 60 percent of that exposure is hedged.
Additional reporting by Bloomberg
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