Amidst all the chaos in the US and the Middle East, it is important to keep an eye on developments elsewhere. One particular pocket of emerging risk comes from Taiwan.

In the short term, a particular point of vulnerability relates to falls in the US dollar against the Taiwanese dollar, and its impact on Taiwanese life insurers. These hold roughly US$700bn in US bonds, mostly corporate bonds [1], accounting for 6-7% of the US corporate bond market [2].

Because the exchange rate of the Taiwanese dollar and US dollar has been broadly stable in the past, a lot of this of the currency risk is unhedged. Even that which is hedged is often done on the basis of rolling 3-month hedges [3], [4]. However, a recent spike in the Taiwanese dollar against its US equivalent has led to currency losses [5]. As a result, Fitch has placed many Taiwanese insurers on downgrade watch [6]. Fitch noted that the insurers should have sufficient capital to withstand a 10% appreciation in the Taiwanese...

Six months ago, I published a blog [1] highlighting some of the risks which may arise on Donald Trump’s accession to power in January. A lot has happened since then. Comparing the risks identified with what has occurred…

1. Tariffs and trade wars - I noted Trump's election promise to levy tariffs of 10-20%, with higher tariffs on China, and that this could raise prices and reduce global growth. Sure enough, on 2^nd April, which he styled “Liberation Day”, Trump imposed a minimum 10% tariff with higher rates for those with large trade surpluses with the US [2]. These were much higher than many had feared, with the effective tariff on imports coming into the US rising from 2% in 2024 to an average of 24% [3].

Back in November, I worried that markets were not pricing in the risks posed by Trump and his tariff plans. This appears to have been borne out with stockmarkets falling sharply after “Liberation...