Insurers in Taiwan to face increased capital pressure: Fitch Ratings

IFRS 17 adoption could lead to profitability.

Taiwan’s insurers may face higher interset-rate charges under the new framework imposed by the Taiwanese regulator, said Fitch Ratings.

Taiwan’s Financial Supervisory Commission (FSC) issued guidance on localisation adjustments and transitional measures for asset risks under the new solvency framework. 

The implementation date is set for 1 January 2026. 

The adjustments provide insurers with more time to adjust their asset allocations and narrow capital gaps for equity and real estate investments. This includes reducing capital charges on certain assets and extending phase-in periods. 

However, insurers still need to build capital to meet stricter interest rate charges and a new accounting standard.

This could result in three to four times higher interest-rate-related capital charges compared to the current regime, mainly due to past sales of savings-type products with high guaranteed yields.

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To adapt to the changes, insurers are expected to raise capital through equity and subordinated debt and reduce investment risks. Some major life insurers have already issued or announced the issuance of subordinated debt worth around TWD100b this year.

Moreover, insurers are moving towards adopting IFRS 17, a new global accounting standard. 

This will require evaluating insurance liabilities at current interest rates and will highlight asset and liability mismatches, particularly in foreign currency investments and local-currency insurance obligations.

IFRS 17 will provide clarity on insurers' profitability, incentivizing a shift from savings-type to protection-type products, which tend to be more profitable under this accounting standard. 

The FSC has already tightened regulations on savings-type products to limit insurers' interest-rate risk exposure.