For decades, Taiwan’s life insurance companies boasted of above-average returns from their heavy investment in US bonds. That reliance is now a major risk threatening more than $700 billion of assets.
Unlike insurers in other countries like Japan where diversification is the norm, Taiwanese firms have more than 90% of their overseas assets denominated in the dollar. This puts them at risk of a long-term decline in the US currency as the appeal of American exceptionalism wanes.
Worse, there are few signs that the $1.2 trillion industry is ready for a major overhaul of its investment model given the limited size of the local financial market and a habitual dependence on regulatory support when times are tough. That means the sector’s $4 billion currency loss between January and April and some of its biggest players’ w…