HONG KONG–(BUSINESS WIRE)–AM Best has revised its market segment outlook to negative from stable for Taiwan’s non-life segment, citing a resurgence of COVID-19 that has led to significant losses on pandemic-related insurance policies. .
In a new Best’s Market Segment Report, “Market Segment Outlook: Taiwan Non-Life Insurance,” AM Best notes that ultimate losses for Taiwan’s non-life industry remain highly uncertain and subject to the infection rate and potential government policy changes; impacts to companies vary depending on their pandemic insurance exposures and policy expiration patterns. The COVID-19 spike has led to a capital event for some companies, while others face an earnings event for financial year 2022. (Please see related Best’s Commentary, “Spike in Pandemic-Related Claims in Taiwan Could Create Capital Event for Some Non-Life Insurers.”)
“AM Best expects that the total claims from the pandemic policies will continue to rise and put material pressure on the non-life segment’s underwriting performance for full-year 2022,” said James Chan, associate director, AM Best. “However, over the intermediate term, insurers that were less impacted are likely to recoup such losses from their non-pandemic-related traditional underwriting portfolios, which have a track record of favourable technical results.”
The prolonged low interest rate environment in Taiwan, as well as heightened capital market volatility during the first half of 2022, also continues to challenge non-life insurers. The local stock market index declined by nearly 20% during the first six months of 2022, creating volatility to carriers’ capitalisation and operating results through capital gains and losses. After appreciating against the U.S. dollar for the past three years, the Taiwanese dollar depreciated by 8% for the year to date 31 July.
AM Best expects the market to maintain its focus on profitability and achieve operating margins for non-pandemic lines of business in 2022, similar to levels prior to the surge of COVID-19 infections.
“Several insurers may face capital erosion pressure where their regulatory solvency ratios could fall below the minimum requirement of 200% over the near term,” said Christie Lee, senior director, analytics, AM Best. “However, these insurers typically have either parent financial holding companies or major financially strong shareholders to support them during the current difficult period.”
To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=323194.
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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