Kathmandu. Taiwanese life insurers are issuing U.S. dollar bonds at a record pace to build a capital buffer and protect against rising currency mismatch risks. As a result, billions of rupees are being lost.
So far this year, the island nation’s insurance companies have sold more than $1.8 billion in subordinated loans to the Taiwan and Singapore markets, according to data compiled by Bloomberg. That’s close to last year’s record.
Despite the cost of raising funds in greenback, insurers can ramp up their momentum next year to meet higher capital requirements and better adjust the duration of assets and liabilities and currency imbalances. Nicholas Yap, head of Asia credit desk analysts at Nomura Holdings Inc in Singapore, said it could continue to grow next year as some new names may enter the market.
The sharp rise of the Taiwan dollar in May put insurance companies with $700 billion in foreign assets under close watch. That’s because exchange rate fluctuations and rising hedging costs are hurting profits and raising concerns about their financial health.
