Taiwan’s life insurers buckle up for capital standard implementation by 2026

Life insurers are expected to move towards health and accident policies in the next two years.

Taiwan's domestic life insurance companies are gearing up for the implementation of the Insurance Capital Standard by 2026, a localised solvency framework aimed at better risk reflection, said Fitch Ratings.

Although, the challenging economic landscape has hindered these insurers' organic capital growth. 

To counter this, many are resorting to issuing subordinated debt to bolster their equity, as Fitch Ratings predicts heightened capital pressure due to the stricter solvency rules.

Over the next 12-18 months, a moderation in premium decline is expected in Taiwan's life insurance industry, given the already low starting point. 

This follows a tough period marked by plummeting premiums and net income due to US interest rate hikes.

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The pace of premium decline slowed to 11% in the first half of 2023, following a 21% drop in 2022. 

Market sentiment waned amidst volatile financial conditions, and there was a move away from unprofitable savings-oriented products due to tighter regulations.

Anticipating improved profitability, life insurers are projected to shift their sales focus away from savings products and towards health and accident policies in the next two years. 

This shift is driven by the upcoming adoption of the global accounting standard IFRS 17 in 2026.