In response to the Taiwan dollar's rise of nearly 7% against the US dollar in May and a significant drop in US bond ratings, life insurance companies face serious foreign exchange loss issues. On June 12, the Financial Supervisory Commission (FSC) officially announced three temporary measures to assist the life insurance industry in coping with recent drastic changes in the financial environment.

The head of the FSC's Insurance Bureau, Wang Lihui, stated at a regular press conference that the commission invited the Insurance Insurance Center, the four major accounting firms, the Life Insurance Association, and industry representatives to discuss and decided to implement the following three measures:

• First Measure: The capital adequacy ratio will adopt an average rate system, similar to the current semi-annual average for stocks, to calculate self-capital and risk capital. This measure is primarily applicable to existing financial assets affected by short-term fluctuations in the foreign exchange market, to which insurers have not been able to adjust their hedging strategies, but does not include foreign cash and foreign deposits.
• Second Measure: Adjustments to the basis for calculating the reserve for policy liabilities. The FSC will increase the flexibility in calculating reserves for certain insurance products while ensuring policyholders' interests. Specifically, the interest rate for calculating reserves may be raised by up to one percentage point from the current insurance product calculation guidelines. Additionally, the mortality tables used for calculating liabilities may be replaced with the “Taiwan Life Insurance Industry Sixth Experience Mortality Table” at 100%, which is more aligned with current national life experience data. However, the adjusted liability reserves may not be lower than the value reserves of the policy.
• Third Measure: Insurance companies are required to forcefully increase foreign exchange variance reserves. For those adopting the old system, the monthly fixed deposit ratio will be raised from 0.06% to 0.085%, reaching an annual fixed deposit ratio of 1.02%; those adopting the new system will see an increase from 0.1% to 0.125%, achieving an annual fixed deposit ratio of 1.5%. In addition, companies must set aside 30% of their pre-tax earnings for 2025 as foreign exchange variance reserves.

The FSC emphasized that the purpose of these temporary measures is to help businesses withstand short-term severe fluctuations in the market while continuing to strengthen their financial resilience. Insurance companies wishing to apply for adjustments in the calculation of reserve liabilities must increase their foreign exchange variance reserves and propose specific plans to enhance operational resilience.