Life insurers in Taiwan have shifted their focus towards sales of protection-type products and continued to strengthen their capitalisation, on the implementation of accounting standard IFRS 17 and the Taiwan-localised Insurance Capital Standard (TW-ICS) in 2026, Fitch Ratings says.
In its report, “Taiwan Life Insurance Dashboard: November 2024”, Fitch expects the life sector to push accident and health insurance products with higher and sustainable contractual service margins. These products posted a 16% y-o-y increase in first-year premiums in 9M2024. Fitch believes US Fed rate cuts may drive more demand for US dollar-denominated variable-interest life insurance products. An ability to balance premium growth and margin expansion will differentiate insurers’ credit profiles.
Most life insurers' profitability improved notably in 1H2024 from 1H2023 on stronger new business margin and investment returns on stock market performance. The new foreign currency volatility reserve system announced by the Financial Supervisory Commission of Taiwan in August 2024 allows more operational flexibility to manage hedging costs.
Fitch thinks insurers will continue to issue either onshore or offshore bonds through wholly owned special purpose vehicles (SPVs) overseas (which count towards capital), to prepare for TW-ICS, the upcoming new regulatory solvency regime with higher standards on capital requirements.