Taiwan’s insurance industry could lose up to NT$150 bn in 1Q17: legislator

Industry would incur losses due to TWD appreciation and foreign investment exposure

Legislator William Tseng (曾銘宗) (By Central News Agency)

TAIPEI (Taiwan News) -- Kuomintang Legislator and former chair of the Financial Supervisory Commission (FSC) William Tseng (曾銘宗) said today at a Finance Committee meeting at the Legislative Yuan that Taiwan’s insurance industry is set to incur heavy losses due to the appreciation of the New Taiwan Dollar (TWD).

Tseng said that the currency has appreciated 5 percent against the U.S. dollar so far this year. As Taiwanese insurance companies are exposed to overseas investments, the repatriation of that income would significantly decrease after the currency exchange.

Tseng estimates that the country’s insurance industry is set to lose between NT$120 billion (US$3.93 billion) and NT$150 billion in the first quarter of the year.

The FSC reported the amount of overseas investments held by the financial sector totals US$900 billion (NT$27.4 trillion), of which NT$11.5 trillion is held by the insurance industry and NT$161.9 billion is held by securities firms.

FSC Insurance Bureau Director-General Grace Lee (李滿治) said that 74 percent of insurance industry investments are hedged to reduce risk, and there are currency exchange mechanisms in place to further reduce losses in case of currency fluctuations.

Tseng, however, believes that with 26 percent of investments that are not hedged pose a serious risk to the industry. He said assuming only 20 percent of the investments are at risk, that equals as much as NT$2.4 trillion that could be affected by currency fluctuations in the first quarter of this year.