Asia

Life insurers face challenges in Taiwan

Taiwan’s life insurers are seeking increased diversity in products and distribution channels to improve their risk profiles and to cope with the industry’s challenging operating conditions, according to Fitch Ratings. For example as interest rates continue to stay low, Taiwanese insurers have turned to products such as participating policies and investment-linked contracts to reduce their operating risk profiles. Fitch notes that the Taiwanese life insurance industry’s average reserving costs have also continued the trend downwards with sales of new product types. But the agency warns that rising hedging costs could potentially lead to heightened foreign currency exposure, which would in turn introduce volatility to the sector’s earnings and capital position. Greg Carter, managing director and head of Fitch’s EuroAsia Insurance Group, indicated that developments in the global market, such as Solvency II and IFRS would introduce better alignment between risk and capital in the insurance market, as well as stimulate alternative risk hedging techniques such as insurance securitisation.