Fitch puts Taiwan life insurers on downgrade watch after currency surge
TOKYO :Credit ratings agency Fitch on Thursday placed five Taiwanese life insurers under review for potential downgrades after a sharp surge in the Taiwanese dollar this month put stress on their balance sheets.
Fitch put Cathay Life Insurance, Fubon Life Insurance, KGI Life Insurance, Nan Shan Life Insurance and Taiwan Life Insurance on "Rating Watch Negative" due to the "substantial currency mismatch" produced by their "sizeable" U.S. dollar holdings, the ratings agency said in a press release.
"While insurers have hedged a majority of their balance sheet mismatches, we believe this strategy will come under pressure due to the surge in hedging costs, and unhedged positions continue to expose them to sharp currency swings," Fitch said.
"The potential for further Taiwan dollar appreciation remains."
Taiwan's dollar experienced an unprecedented 8 per cent two-day surge at the start of this month in what analysts postulate was a scramble to repatriate U.S.-based investments, with confidence in the U.S. dollar tarnished by President Donald Trump's trade war, and as speculation built that U.S.-Taiwan tariff negotiations might include an agreement to weaken the greenback.
Fitch estimates the insurers have sufficient capital buffers to withstand a 10 per cent rise in the Taiwan dollar against the U.S. dollar from the start of 2025. Currently, the local currency is up about 8.8 per cent this year.
The ratings agency said it expects to resolve the reviews over the next three to six months.
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