POOR RETURN ON ASSETS FOR TAIWANESE LIFE ASSURERS

Taiwan’s life assurance sector achieved an average return on assets of only about 0.35% last year, according to a report from Taiwan Ratings Corp (TRC), a subsidiary of Standard & Poor’s. The report noted that there were mismatches between assets and liabilities in the Taiwan life sector, mainly because of the island’s under-developed capital markets and regulatory restrictions. TRC noted that most Taiwanese life assurers attempted to overcome these problems by increasing their overseas investment exposure, which gave higher yields but which increased foreign exchange risk. The report stated that the asset quality of Taiwanese assurers was on the whole satisfactory, and that the risk management of the larger companies was adequate. “The mediocre operating performance of the industry in recent years is largely a result of strong competition and negative interest rate spreads on old policies with high guaranteed rates, though performances vary among individual insurers”, said Andy Chang, a credit analyst at TRC. The island’s life assurers had an adequate capital rating, although this varied widely between individual assurers, the report said.