The Financial Supervisory Commission is taking steps to reduce the burden of life insurers’ foreign-exchange hedging costs, which have risen because of the wide gap between Taiwan and US interest rates.
Local insurers would be allowed to apply to increase foreign exchange reserve (forex) volatility reserves from other reserve pools, Insurance Bureau Deputy Director-General Tsai Huo-yen (蔡火炎) said at a briefing yesterday in Taipei.
The changes would effectively boost insurers’ forex hedging reserves to as much as NT$960 billion (US$30.1 billion) from the current level of NT$300 billion, Tsai said. This would reduce their need for hedging tools like currency swaps and non-deliverable forwards, lowering hedging costs.
Photo: CNA
New rules would also double the so-called extra deposit and offset rate for the forex gains and losses of insurers’ unhedged assets and liabilities to 100 percent.
The New Taiwan dollar has declined about 4 percent this year against the greenback, with the local benchmark interest rate of 2 percent less than half of the 5.25 percent to 5.5 percent in the US.
The industry spent more than NT$360 billion hedging against foreign exchange fluctuations last year, commission data showed.
Taiwan first introduced the reserves mechanism in 2012, allowing insurers to deposit part of their forex gains to the pool and tap the funds to hedge against losses, in a way to smooth out their profits. It revised the rules in 2019 and again last year to increase the flexibility of forex risk management.
The total pool of reserves across life insurers increased 66 percent to NT$231 billion from the start of this year through last month, official data showed. While life insurers reaped forex gains of NT$923.7 billion so far this year thanks to a weaker NT dollar, hedging tool losses and costs totaled NT$894.2 billion.
Semiconductor shares in China surged yesterday after Reuters reported the US had ordered chipmaking giant Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) to halt shipments of advanced chips to Chinese customers, which investors believe could accelerate Beijing’s self-reliance efforts. TSMC yesterday started to suspend shipments of certain sophisticated chips to some Chinese clients after receiving a letter from the US Department of Commerce imposing export restrictions on those products, Reuters reported on Sunday, citing an unnamed source. The US imposed export restrictions on TSMC’s 7-nanometer or more advanced designs, Reuters reported. Investors figured that would encourage authorities to support China’s industry and bought shares
TECH WAR CONTINUES: The suspension of TSMC AI chips and GPUs would be a heavy blow to China’s chip designers and would affect its competitive edge Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s biggest contract chipmaker, is reportedly to halt supply of artificial intelligence (AI) chips and graphics processing units (GPUs) made on 7-nanometer or more advanced process technologies from next week in order to comply with US Department of Commerce rules. TSMC has sent e-mails to its Chinese AI customers, informing them about the suspension starting on Monday, Chinese online news outlet Ijiwei.com (愛集微) reported yesterday. The US Department of Commerce has not formally unveiled further semiconductor measures against China yet. “TSMC does not comment on market rumors. TSMC is a law-abiding company and we are
FLEXIBLE: Taiwan can develop its own ground station equipment, and has highly competitive manufacturers and suppliers with diversified production, the MOEA said The Ministry of Economic Affairs (MOEA) yesterday disputed reports that suppliers to US-based Space Exploration Technologies Corp (SpaceX) had been asked to move production out of Taiwan. Reuters had reported on Tuesday last week that Elon Musk-owned SpaceX had asked their manufacturers to produce outside of Taiwan given geopolitical risks and that at least one Taiwanese supplier had been pushed to relocate production to Vietnam. SpaceX’s requests place a renewed focus on the contentious relationship Musk has had with Taiwan, especially after he said last year that Taiwan is an “integral part” of China, sparking sharp criticism from Taiwanese authorities. The ministry said
US President Joe Biden’s administration is racing to complete CHIPS and Science Act agreements with companies such as Intel Corp and Samsung Electronics Co, aiming to shore up one of its signature initiatives before US president-elect Donald Trump enters the White House. The US Department of Commerce has allocated more than 90 percent of the US$39 billion in grants under the act, a landmark law enacted in 2022 designed to rebuild the domestic chip industry. However, the agency has only announced one binding agreement so far. The next two months would prove critical for more than 20 companies still in the process
RSS