Fitch Ratings has placed five Taiwanese life insurers under review for potential downgrades, following significant balance sheet pressures caused by a sharp appreciation of the Taiwan dollar in early-May.
The five affected insurers - Cathay Life, Fubon Life, KGI Life, Nan Shan Life, and Taiwan Life, have been moved to the ‘rating watch negative’ category.
Fitch mentioned that there was a substantial currency mismatch on the insurers’ books due to their sizeable US dollar holdings. The ratings agency warned that rising hedging costs, combined with unhedged positions, leave the balance sheet of these insurers vulnerable to further currency swings.
The Taiwan dollar surged by an unprecedented 8% over two days in early May, a move analysts attributed to a rapid repatriation of US-based investments. Fitch believes that the Taiwanese insurers have sufficient capital buffers to withstand a 10% rise in the Taiwan dollar against the US dollar from the start of 2025.