AM Best is maintaining a negative outlook on Taiwan’s non-life insurance segment, citing increased reinsurance costs and a decline in the investment asset base, as some assets were liquidated to pay pandemic-related claims.
The Best’s Market Segment Report, “Market Segment Outlook: Taiwan Non-Life Insurance”, states that the non-life segment suffered a huge net loss of TWD 173 billion (USD 5.4 billion) in 2022 due to the pandemic, which outstripped the cumulative earnings of the last decade. In addition, insurers needed to sell off investments to pay pandemic-related claims, and saw total investments shrink nearly 20% in 2022. Some non-life insurers continued to see unfavourable claims development and reported net losses in the first quarter of 2023, but the majority had returned to operating profitability as of second-quarter 2023. Insurers also have adopted more conservative investment strategies and de-risked their portfolios. The local stock market has recovered through the first nine months of 2023; however, non-life insurers continue to grapple with the low interest rate environment and volatility in operating results through capital gains and losses.
“Weaker capitalisation will become the new normal following the Taiwanese non-life segment’s huge pandemic insurance losses,” said Madison Fan, financial analyst, AM Best. “The industry’s average capitalisation has rebounded strongly thus far in 2023 but remains materially below pre-pandemic levels.”
AM Best expects full-year 2023 operating performance to be bolstered by the recovery in the capital markets and reserve releases, given that pandemic policies have all matured, and ultimate claims should be close to fully developed. One counterbalancing factor to the favourable operating performance is heightened reinsurance costs due to the current hardening cycle in the global reinsurance market.
“The January 2023 renewal season was described as one of the toughest in the past decade, and the market expects that reinsurance rates will again increase in the 2024 renewals,” said Stephanie Mi, financial analyst, AM Best.
To access the full copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=336786.
AM Best in conjunction with the Taiwan Insurance Institute and the Taiwan Insurance Guaranty Fund will present a seminar on Friday, 20 October 2023, titled “Rating Perspectives on IFRS 17.” The event, with members of AM Best’s analytical team, will take place on the second floor of the Grace Garden at the Sheraton Grand Taipei Hotel in Taipei, Taiwan, at 1:30 p.m. CST. For more information, please visit http://www.ambest.com/conference/IMBTAI2023.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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