Year-End 2016 Foreign Currency Exposure in the U.S. Insurance Industry

"Year-End 2016 Foreign Currency Exposure in the U.S. Insurance Industry"

"As of year-end 2016, U.S. insurers reported foreign currency denominated bond exposure to 39 different currencies with a book/adjusted carrying value (BACV) of $94 billion, or about 1.5% of total cash and invested assets, an increase from $82.9 billion in 2015. This NAIC Capital Markets Bureau Special Report examines the foreign currency-denominated bond exposure of U.S. insurers, with further analysis on the largest five foreign currency exposures. Foreign currency exposure is translated and reported in U.S. dollars as per Statement of Statutory Accounting Principles (SSAP) No. 23—Foreign Currency Transactions and Translations. The translation of investments denominated in foreign currency to U.S. dollars (USD) in a weak dollar cycle benefits U.S. insurers, increasing the BACV of those investments (and the reverse when the U.S. dollar is strong relative to those currencies)."

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