Negative Outlook On Taiwan’s Non-life Insurance Segment - AM Best

KUALA LUMPUR, Oct 20 (Bernama) -- AM Best has maintained 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, according to its new report.

In the Best’s Market Segment Report, “Market Segment Outlook: Taiwan Non-Life Insurance”, the global rating agency states that the non-life segment suffered a huge net loss of NT$173 billion (US$5.4 billion) in 2022 due to the pandemic, which outstripped the cumulative earnings of the last decade. (US$1=RM4.77)

In addition, insurers needed to sell off investments to pay pandemic-related claims, and saw total investments shrink nearly 20 per cent in 2022, while some non-life insurers continued to see unfavourable claims development and reported net losses in the first quarter of this year, but the majority had returned to operating profitability as of second-quarter.

AM Best financial analyst, Madison Fan said weaker capitalisation will become the new normal following the Taiwanese non-life segment’s huge pandemic insurance losses.

“The industry’s average capitalisation has rebounded strongly thus far in 2023 but remains materially below pre-pandemic levels,” said Fan in a statement.

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.

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.

However, one counterbalancing factor to the favourable operating performance is heightened reinsurance costs due to the current hardening cycle in the global reinsurance market.

-- BERNAMA