February 18, 2026
By Matthew Vegari, Head of Research
In light of recent volatility in the dollar, this week’s brief explores the degree to which year-to-date FX swings have influenced the hedging behavior of asset owners. For this analysis, the Research Desk leveraged Clearwater’s proprietary database to contextualize if and how US insurers have altered their portfolios in 2026. We found that as the dollar has slipped, insurers’ net purchases of forward dollar contracts have surged.
The dollar index has gyrated mightily year-to-date and is now down 1 to 2%—a modest decline in absolute terms but one that has triggered an outsized response from certain investors. US insurers, ever vigilant about foreign currency exposure, have ramped up their hedging activity dramatically: Both buying and selling of forward USD contracts have surpassed previous peaks observed during Liberation Day in April 2025.
What’s striking isn’t just the gross volume but the directionality. The net effect reveals a strong surge in dollar purchases via forwards, the highest we’ve observed since last fall when the greenback rallied against its 2025 lows. This pattern suggests insurers aren’t merely adjusting existing hedges; they’re actively positioning for further dollar weakness or, at minimum, protecting against it.
The pattern of insurer hedging activity over the past year reveals something counterintuitive: It’s not simply dollar weakness that spurs forward contract purchases. Instead, insurers respond to inflection points, moments when trajectories shift or uncertainty spikes.
The biggest surges in forward USD purchases have clustered around four distinct episodes. Two occurred when the dollar plunged: immediately post-Liberation Day in April 2025, when tariff announcements sent the greenback tumbling, and again in January 2026 as the dollar touched its recent lows. But the other two surges came when the dollar rallied: once in summer 2025 when the decline was arrested and again in fall 2025 when the dollar recouped some of its year-to-date losses.
A bidirectional response suggests insurers are managing volatility and regime uncertainty. When the dollar falls sharply, they hedge against further depreciation and protect foreign-denominated assets. When it rallies, they lock in more favorable rates and rebalance exposures that may have drifted during the decline.
Insurers are exposed to dozens of currencies globally, but the Research Desk investigated the flipside of dollar purchases, i.e., foreign currencies that get sold/hedged. We found that the majority of net purchases of forward dollars flow from euros, typically followed by pounds and Australian dollars, depending on the period. The transactions are not consistent month-to-month and can reflect individual currency volatility. Of late, euros have taken the driver’s seat, accounting for 52% of net purchases in January.
This research was featured in Bloomberg on February 18, 2026.
Additional research by Tyler Busby, Data Scientist