Taiwan insurers expand FX reserves after dollar appreciation: AM Best

70% of Taiwanese life insurers’ portfolios were allocated to foreign investments.

The Taiwan dollar’s sharp rally against the US dollar has heightened foreign exchange risk exposure for Taiwanese life insurers heavily invested in US-denominated assets, according to a recent commentary from AM Best.

The report, titled “Taiwan Dollar Rallies, Life Insurers More Exposed to Foreign Exchange Risk,” noted that the local currency appreciated by 8% against the US dollar over a two-day span last week. 

The surge was driven by increased foreign capital inflows into the domestic equity market, speculative trading in the exchange rate, and institutional de-risking of US-denominated assets, including by major life insurers and exporters.

As of year-end 2024, approximately 70% of Taiwanese life insurers’ portfolios were allocated to foreign investments, primarily US fixed income securities, according to data from the Taiwan Insurance Institute. 

The sector’s investment leverage stood at up to ten times reported capital and surplus.

AM Best Director of Analytics James Chan said that whilst life insurers have been building reserves to buffer currency fluctuations—amounting to $9.36b (TW$283.6b) as of March 2025—the reserve level remains limited relative to over $760b (TW$23t) in foreign investments, constraining their capacity to absorb short- to mid-term volatility.

In contrast, Taiwan’s non-life insurers had a much lower allocation to foreign investments—about 15% in 2024—and maintain a focus on liquidity to meet short-tail underwriting liabilities. 

With lower foreign investment-to-capital gearing, smaller balance sheets, and consistent use of FX derivatives with moderately high hedging ratios, AM Best expects the non-life sector to remain resilient to recent FX volatility, with no immediate rating pressures anticipated.

Chan also cited broader macroeconomic and geopolitical uncertainties impacting Taiwan’s insurance industry but noted that foreign exchange risk management is a core component of enterprise risk management (ERM) for local insurers.