TAIWAN: CB Sees Financial System Stable Despite Broad FX Losses in April

Taiwan's 2025 financial stability report certainly eyed more carefully after recent currency volatility. The report states the insurance sector suffered a TWD 118bln FX loss in April (USD/TWD dropped 3.6% over the month), but losses would have been well over double that on a pre-hedging basis (TWD 322bln), and as such the financial system remains generally stable. Full report for download is here (only available in Mandarin so far): https://www.cbc.gov.tw/tw/cp-899-182554-5fef0-1.html

• Worth noting that the USD/TWD fell further, and more sharply, in early days of May: as much as 7.7% over the course of two sessions - meaning FX losses for insurers were likely of a much higher magnitude as both the spot move and the sharp increase in hedging costs will have eaten into positioning.
• The report acknowledges the life insurance sector, with large domestic & foreign investment positions, faces higher market risks ahead. Implied vols are likely one of these risks - feeding directly into hedging costs and forcing firms to seek more cost effective hedges via the likes of HKD, IDR and KRW - a key driver of the APAC FX vol earlier this month.