A decline in premiums in the life insurance industry could moderate over the next 12 to 18 months, primarily due to a low comparison base, as local insurers adapt to regulatory tightening and economic uncertainty, Fitch Ratings said yesterday.
The premium retreat slowed to 11 percent in the first half of this year, compared with a 21 percent plunge last year due to a muddy global economic outlook and a shift away from unprofitable savings-type products amid stricter regulations, Fitch insurance analyst Stella Ng (吳傑佩) told a media briefing in Taipei.
Shares of investment-type products have been falling amid financial market volatility and regulatory restrictions in the past few years, noticeably with the prohibition of sales of new policies with negative contractual service margins, Ng said.
Photo: Wu Hsin-tien, Taipei Times
The changes led to a decline in the sales of savings products, including traditional annuity and interest variable life policies, she said.
However, Fitch said it sees an increase in health insurance policies, which might prove to be sustainable and more profitable growth drivers in the long term.
“We see health insurance expanding in line with an aging society, and rising awareness of health risks and healthcare needs,” Ng said.
Taiwan is on track to become a super-aged society in 2025 when people aged 65 or older would exceed 20 percent of its population, the National Development Council has said. Authorities have encouraged sales of protection insurance policies to help bolster the nation’s social safety net.
In the meantime, Fitch said it expects local insurers to face higher interest-rate charges under the Insurance Capital Standard framework that is to be implemented in 2026, in line with international accounting rule changes.
The new framework would set higher capital requirement on asset and interest-rate risks, it said.
The more stringent requirement could increase interest-rate-related capital charges to three to four times that of current levels, because the savings-type products local insurers sold in the past offer high guaranteed yields, Fitch said
New accounting rules would provide clarity on local insurers’ profitability outlook, as they would better reveal the movement of contractual service margins, it said.
The financial regulator is likely to clarify any localized adjustments and transitional measures for interest-rate risks, suitable for local business characteristics and conditions, in the near term, Fitch said.
Taiwanese insurers are running calculations under the current rules as well as the new framework, it said.
Fitch expects life insurers to continue raising capital through equity and subordinated debt.
Year to date, several major life insurers have issued or plan to issue subordinated debt of about NT$100 billion (US$3.13 billion).
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