Taiwan insurers hit by losses on US dollar slump
Among the six biggest, Nanshan Life Insurance Co posted the largest loss at more than NT$9bil. — Reuters
Taipei: Taiwan's biggest insurers posted a total loss of almost NT$19bil or about US$620mil in April due to currency volatility after US President Donald Trump warned of a wave of global trade tariffs.
The insurers suffered the worst shortfall in a single month in one and a half years, Taipei-based Economic Daily News reported.
Among the six biggest, Nanshan Life Insurance Co posted the largest loss at more than NT$9bil.
KGI Life Insurance Co was the only one among the largest to avoid a hit.
The big shortfalls came even before the Taiwan dollar's spike in early May against the greenback, which raised concerns about the industry's hedging and investment strategies.
Shares of the Taiwanese insurers rose yesterday, buoyed by a broad rally in the region after the United States and China agreed to temporarily lower tariffs for 90 days.
'The Taiwan dollar has weakened over the past few days and if that can continue, it can take pressure off of their earnings,' said Steven Lam, an analyst at Bloomberg Intelligence.
Insurers are also benefiting from the stock market recovery, with April earnings now backward looking, he said.
Cathay Life Insurance Co had a loss of NT$2.57bil in April due to higher hedging costs, Cathay Financial Holding Co said in a statement.
The firm said Trump's tariff announcement in April exceeded expectations, raising hedging costs.
Fubon Life reported a net loss of NT$2.41bil, citing volatile global financial markets due to US trade policies.
The losses add to evidence that the island's life insurers may be over-exposed and under-hedged relative to their US dollar investments.
The Taiwan dollar jumped over 6% in the first two trading days of May, effectively reducing the value of unhedged US dollar investments, leading the Financial Supervisory Commission to offer assurances on May 6 that no insurers have had solvency issues so far.
The central bank the same day announced it would inspect banks to ensure that fund inflows are for investment, not currency speculation.
The Taiwan dollar has since stabilised.
Fubon Life said it has increased its hedging to mitigate the currency impact of Taiwan dollar gains.
It said it would closely monitor the market and dynamically adjust its hedging to handle currency risks.
Cathay Life, which had its first monthly loss since 2024, said hedging costs rose last month, but the impact is controllable.
Goldman Sachs Group Inc analysts said in a May 8 note that a 10% appreciation of the Taiwan dollar against the greenback could lead to around US$18bil of unrealised currency losses for local insurers, who hold about US$710bil of foreign currency assets.
Such a move would wipe out the roughly US$6.6bil reserves insurers have for currency volatility, the Goldman analysts wrote. — Bloomberg
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