Taiwan life insurers will continue to strengthen their capital position in response to the implementation of Taiwan-localised Insurance Capital Standard (TW-ICS) and IFRS 17 in 2026, by refining their business mix, optimising investment strategies, and issuing capital-qualifying bonds, alongside the regulator's various transition measures, says Fitch Ratings.
In the report, “What Investors Want to Know: Taiwan Life Insurers Enhance Capital Amid TW-ICS”, Fitch says that the coming new capital regime, imposing higher capital requirement standards and new accounting rules, will push life insurers to enhance their capitalisation and to exercise effective asset-liability management. Taiwan's Financial Supervisory Commission, the regulator, has introduced a series of localised adjustments and transitional measures over a 15-year phase-in period from 2026.
Interest-rate risk remains a key challenge for Taiwanese life insurance companies. They have been shifting towards higher-margin protection and health products to boost their contractual service margin and reduce sensitivity to interest-rate movements. Insurers are also issuing capital-qualifying bonds to bolster their capital positions. Fitch believes these approaches will strengthen insurers' financial health and reinforce their capital positions under the new regimes.
Hedging cost is one of the key determinants of life insurers’ profitability. Fitch expects them to continue to evaluate their FX exposure and to assess the limits of their FX risk tolerances, notwithstanding the new rules on foreign-currency volatility reserves to allow insurers more operational flexibility.
Fitch’s report answers commonly asked questions from investors, including the changes introduced by TW-ICS and new accounting rules, how Taiwanese insurers are addressing capital pressure from TW-ICS, and what initiatives help insurers with IFRS 17 and TW-ICS. It also addresses questions on foreign currency movements and real-estate exposures that concern investors.