Taiwanese life insurers' growing exposure to the Middle East could face valuation pressure amid ongoing conflict in the region, though the risks remain manageable for now, according to S&P Global Ratings.
The agency said its scenario testing indicates that insurers can withstand current levels of stress. However, a prolonged conflict could lead to higher earnings volatility and weaken capital buffers.
Taiwan’s life insurers have steadily increased their allocations to Middle Eastern investments in recent years, attracted by higher sovereign and corporate bond yields as well as diversification benefits.
As of end-2025, the sector’s total exposure to the region stood at NT$1.77tn (approx. $54-56bn), significantly higher than its exposure to Russia before the Russia-Ukraine war in 2022, which was NT$138bn.
Direct investments by Taiwan’s rated life insurers in the Middle East—primarily in Israel, Saudi Arabia, Qatar, and the UAE—accounted for 4.1% of their invested assets as of end-2025, with the largest exposure from a single insurer at 8%.
S&P estimates that around 99% of these holdings are in highly rated bonds.
While short-term valuation volatility is expected, the agency does not anticipate write-off losses under its base-case scenario.
These investments are equivalent to about 22.1% of total adjusted capital (TAC), an S&P measure that incorporates adjustments to shareholders’ equity.
S&P’s base case assumes any military conflict in the region will be short-lived, limiting the risk of significant losses given the high credit quality of the assets.
Capital position
Preliminary stress testing suggests insurers’ capital buffers are sufficient to absorb potential losses, even under a hypothetical scenario involving a 15% impairment of regional exposures—comparable to early losses seen during the Russia-Ukraine conflict.
While insurers with weaker capital positions are more vulnerable, S&P expects the overall impact to remain modest, supported by strong liquidity and credit quality, with 98% of the portfolio rated ‘A’ or higher.
Near term
Taiwanese insurers are likely to reduce risk exposure as regulatory scrutiny of investments increases.
Drawing lessons from the Russia-Ukraine conflict, life insurers in Taiwan are expected to take proactive steps to protect their financial positions. These measures may include greater portfolio diversification, improved asset-liability management, higher use of hedging strategies, and more frequent stress testing focused on geopolitical risks, S&P said.
There remains considerable uncertainty around the duration and impact of the Middle East conflict. Although a severe scenario involving investment losses is possible, most Taiwanese life insurers are well-capitalized and should be able to absorb potential declines in asset values. Companies with weaker capital positions and higher exposure to the region will be closely monitored.