Best’s Commentary: Taiwan Dollar Rallies; Life Insurers More Exposed To Foreign Exchange Risk

HONG KONG, May 9 (Bernama) -- The Taiwan dollar has rallied against the U.S. dollar at an unprecedented pace over the past few days, which holds implications for domestic life insurers that have been allocating a large portion of their invested assets in foreign investments, mainly USD-denominated fixed income securities, according to an AM Best commentary.

The Best’s Commentary, “Taiwan Dollar Rallies, Life Insurers More Exposed to Foreign Exchange Risk,” notes that the local currency surged by a combined 8% against the U.S. dollar over a two-day period in the past week. Factors that fueled this momentum include increased foreign capital flow into the domestic equity market, speculative investments in the exchange rate and some de-risking of U.S.-denominated assets by institutions with significant exposures, such as Taiwanese life insurance companies and large exporters.