Taiwan FSC rewrites life insurer forex reporting rules

Unamortised balance stays on the balance sheet, hitting income only at sale.

Taiwan’s Financial Supervisory Commission (FSC) has proposed changes to accounting rules for life insurers to alter how foreign exchange gains and losses are reported, aiming to better reflect the sector’s long-term business model and reduce earnings volatility.

The amendments would revise the “Regulations Governing the Preparation of Financial Reports by Insurance Enterprises” to allow life insurers to amortise unrealised foreign exchange gains and losses on foreign-currency bonds measured at amortised cost, instead of recognising them fully in profit and loss based on spot exchange rates. 

The FSC said this would align financial reporting with the long-term nature of life insurance liabilities and investment holdings.

Under current rules based on IAS 21, exchange rate movements must be recognised immediately in earnings, even though insurers typically hold foreign assets over the long term and do not need to convert them back into local currency in the short term.

The FSC said this has led to large unrealised gains and losses in income statements and encouraged heavy use of short-term derivatives, resulting in high and persistent hedging costs.

From 1 January 2026, the proposed changes would allow unrealised exchange differences on qualifying foreign-currency bonds to be spread over the remaining life of the assets on a straight-line basis. 

Any unamortised balance would be recorded on the balance sheet and recognised in earnings only when the asset is sold.

The draft amendments were released for public consultation, with feedback to be accepted within 30 days.