News eDaily05 Oct 2017

Taiwan:FSC chief says international bond risks to be studied

| 05 Oct 2017

Taiwan's Financial Supervisory Commission chairman Wellington Koo has said that the regulator has no intention of freezing insurers' investments in international bonds. Instead, he called for research and discussions on the risk surrounding investments in such bonds.

Mr Koo told the local media that given concerns raised by lawmakers about weak liquidity in international bonds, the first step to take is to look at risk management by insurers. If there are problems, then the next step is to look at risk control over the investments.

The bonds, denominated in foreign currencies, are issued by foreign entities and listed on the Taipei Exchange.

Mr Koo has said that given that insurers face both liquidity and exchange risks in investing in international bonds, he hoped that they would handle risk management well.

Moody's Investors Service, in a report issued in May, said that the total outstanding international bonds in Taiwan was NT$3.4 trillion (US$112 billion) at 30 April 2017, up from NT$9 billion at the end of 2013.

To cut risk, the FSC imposed curbs that took effect in May 2017 that allow Taiwan insurers to invest only in international bonds that have non-callable periods of at least five years in the primary market or at least three years in the secondary market.

About NT$111.6 billion in currency losses was reported by Taiwanese insurers in the first seven months of this year due to heavy US dollar positions, reported Taiwan News. The FSC and experts have urged local insurers to hedge currency risk to reduce the impact of the strengthening Taiwanese currency on investments.




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