Taiwan’s financial regulator is seeking to change how the island’s life insurers allocate capital after years of relying on New Taiwan dollar premiums to fund large positions in higher-yielding U.S. dollar bonds.
In an Aug. 30 interview with Bloomberg, Financial Supervisory Commission Chairman Peng Chin-lung said insurers will be pushed to reduce their dependence on dollar assets over time, raise domestic investment, and better align the currency and duration of assets with policy liabilities. The shift could affect more than $1.2 trillion in assets managed by Taiwan’s life insurance sector.
According to the report, Taiwan life insurers hold more than $690 billion in overseas investments, with about $162 billion allocated to U.S. corporate bonds. The Financial Supervisory Commission has already added currency allocation to its management assessment framework for life insurers this year and asked firms to set annual improvement targets.
The policy focus is not on forcing short-term sales of U.S. bonds. It is aimed at gradually reducing the structural risk created when insurers use New Taiwan dollar liabilities to support large dollar asset books.
A sharp Taiwan dollar move exposed the mismatch
The industry’s heavy overseas allocation was not simply a directional bet on the U.S. dollar. Life insurers need fixed-income assets with sufficient scale, longer duration, and stable returns to match long-dated policy obligations. Taiwan’s domestic bond market has long been seen as too limited in both size and yield, pushing insurers toward offshore debt markets.
That left the sector with a currency mismatch: most policy liabilities are denominated in New Taiwan dollars, while a large share of assets is parked in dollar bonds. When the New Taiwan dollar strengthens, the translated value of those assets falls. If insurers increase hedging, they face costs tied to interest-rate differentials between Taiwan and the United States as well as forward foreign-exchange market conditions.
A sharp appreciation in the New Taiwan dollar in May 2025 put pressure on insurers’ dollar assets and capital positions. Reuters estimated at the time that Taiwan life insurers held roughly $682 billion in overseas assets, mainly U.S. fixed-income securities.
The FSC later adjusted foreign-exchange accounting treatment, allowing eligible foreign-currency bonds measured at amortized cost to recognize unrealized exchange differences over their expected remaining life. The change reduced the incentive for insurers to rely heavily on short-term hedging tools to smooth single-period earnings, but it did not remove currency risk.
Data from the FSC’s Insurance Bureau showed that, as of the end of October 2025, overseas investments by life insurers had reached NT$22.3 trillion. After excluding foreign-currency policies, the sector still had NT$15.2 trillion in exposure, with hedge positions accounting for about 60%. From 2019 to October 2025, cumulative foreign-exchange hedging costs exceeded NT$1.6 trillion, above combined after-tax net profit of more than NT$1.4 trillion over the same period.
Three regulatory tracks
The regulator’s current approach has three main parts: accounting changes, direct oversight of currency mismatch, and efforts to keep more long-term insurance capital invested in Taiwan.
Accounting changes to reduce short-term distortion
Amendments to the Regulations Governing the Preparation of Financial Reports by Insurance Enterprises, formally revised on Feb. 5, 2026, do not wipe out exchange losses. Instead, they allow eligible unrealized foreign-exchange differences to be amortized over a bond’s remaining life, bringing accounting recognition closer to the long-holding profile of life insurers.
Annual targets for currency allocation
Bloomberg, citing people familiar with the matter, said the FSC has been reviewing overseas investment and dollar exposure on a quarterly basis. Starting in 2026, insurers must set annual targets to reduce overseas exposure tied to New Taiwan dollar policy liabilities, while increasing domestic investment and sales of dollar-denominated policies. Results will be linked to senior executives’ performance reviews. Firms that miss their targets must explain why and outline internal corrective measures.
More domestic assets for insurers to buy
In April 2026, the FSC announced an incentive plan aimed at guiding insurers to increase total investment by NT$300 billion between April 2026 and the end of 2028 across five trusted industries, six core strategic industries, infrastructure, public investment, long-term care and aging-related businesses, and sustainable development bonds.
The regulatory push, as described in the report, is meant to reduce the long-running mismatch between New Taiwan dollar liabilities and dollar assets step by step rather than through rapid selling of U.S. debt holdings.