Taiwan insurer assets face volatility as Middle East war drags on

Rated companies hold regional bonds mostly tied to Israel, Saudi Arabia Qatar and the UAE.

Taiwanese life insurers could face valuation losses on their investments in the Middle East due to the ongoing war, but the impact is likely to be manageable, according to a report by S&P Global Ratings.

“We anticipate short-term volatility on valuations for Middle-East investments held by Taiwanese life insurers. We do not, at this time, factor in write-off losses due to our base-case scenario that the war will likely conclude after a number of weeks,” said Effie Tsai, credit analyst at S&P Global Ratings.

In an article titled “Insurance Brief: Taiwan Life Sector Could Handle Potential Losses On Its Middle East Holdings,” the ratings agency said its scenario testing shows that insurers have sufficient capital buffers to absorb potential losses. 

However, a prolonged conflict could increase earnings volatility and gradually reduce those buffers.

Taiwanese life insurers have increased their investments in the Middle East in recent years, attracted by higher sovereign and corporate bond yields and the need to diversify portfolios.

As of the end of 2025, the sector had a combined exposure of $55b (NT$1.77t) to the region. This is significantly larger than the $4.31b (NT$138b) exposure to Russia before the Russia–Ukraine War began in 2022.

Direct investments in the Middle East, mainly in Israel, Saudi Arabia, Qatar, and the United Arab Emirates, accounted for 4.1% of invested assets for rated Taiwanese life insurers at the end of 2025. 

The highest allocation by a rated insurer was 8%. Around 99% of the sector’s exposure is in highly rated bonds.

These investments are equivalent to about 22.1% of total adjusted capital, a measure that incorporates analytical adjustments to shareholder equity.

Preliminary stress tests by S&P Global Ratings suggest capital buffers would remain adequate even if regional exposures were impaired by 15%. 

The ratings agency added that insurers with thinner capital buffers would be more sensitive to adverse conditions, but the overall impact is expected to be modest. 

S&P Global Ratings noted that the duration and scale of the Middle East conflict remain uncertain, as do its potential effects on commodity prices, supply chains, economies, and credit conditions.

($1.00 = NT$31.9b)