According to recent statistics, insurance companies in Taiwan hold a staggering $460 billion (around NT$13.8 trillion) in currency mismatches, which could trigger significant risks amid a decline in the U.S. dollar. The rapid appreciation of the New Taiwan Dollar against the U.S. dollar has left many investors in dollar-denominated assets, such as investment-linked policies, funds, and life insurance, in a precarious situation.

Experts indicate that the majority of insurance companies' assets are denominated in foreign currencies, including overseas real estate and U.S. bonds, while liabilities are predominantly valued in Taiwanese dollars through policyholder contracts. As the New Taiwan Dollar rises, dollar-denominated assets significantly lose value when converted to Taiwanese dollars, leading to substantial unrealized exchange losses. The recent plummet in Taiwan's stock market reflects a preemptive response to capital pressures and the risk of deteriorating financial reports.

Furthermore, academics warn that the insurance sector did not anticipate this wave of turmoil and lacks adequate hedging measures. In the event of mass contract terminations and redemptions, companies may face liquidity risks, be forced to sell overseas assets at discounted prices, and recognize currency losses, a situation that could worsen up to the end of the year.

The announcement of a 32% tariff parity by the U.S. against Taiwan and a trade surplus of nearly $74 billion further complicates the situation, as the central bank has somewhat allowed the New Taiwan Dollar to appreciate. Investors are well aware that the U.S. government will not easily overlook Taiwan, placing the insurance sector with significant dollar and overseas assets in a troubled state. Shares in Cathay Financial and Fubon Financial plummeted by over 5% and 6%, respectively.

However, the appreciation of the New Taiwan Dollar may affect various export industries, with food and asset-related sectors being relatively favored. Each 1% appreciation of the New Taiwan Dollar affects pre-tax profits in the stock market by approximately 0.5%, while electronic OEM and ODM manufacturers, due to natural hedging in receivables and payables, see a profit margin impact of around 0.2%.