Weaker greenback raises risk of currency mismatch for Asian insurers holding USD assets
Goldman Sachs has estimated that for every 10% of Taiwan dollar appreciation, the country’s insurers would incur an unrealised currency loss of US$18 billion
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[SINGAPORE] A mismatch between the currencies in which insurers’ assets and liabilities are held can put pressure on their capital and ability to fulfil the liabilities.
This is the issue currently confronting insurers in Taiwan, where the majority of assets are invested in US dollar (USD) bonds, but liabilities are in the domestic Taiwan dollar. A weaker USD has meant that the value of assets has fallen, and an insurer may need to put in additional capital or equity. The US Dollar Index has fallen by more than 8 per cent in the year to date.
What is the likelihood that this could happen in Singapore?
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