Taiwan Foreign Assets: A Crisis Unfolds as FX Losses Mount, Draining Over 10% Value

Key Points

1. Taiwan's life insurers are heavily reliant on foreign investments, making them vulnerable to currency fluctuations.

2. Recent depreciation of the US dollar against major currencies like the Japanese Yen and Euro has exacerbated FX losses when converted back to New Taiwan Dollars.

3. FX losses directly affect insurers' ability to meet future policyholder payouts and reduce their future investment capacity.

4. Hedging against currency risk is often too expensive, forcing insurers to either bear the exposure or sacrifice long-term returns.

5. The scale of FX losses in Taiwan's life insurance sector could pose systemic risks to the broader financial system.