Taiwan should try to attract investment from international insurance conglomerates to beef up the local insurance sector's competitiveness, said Frank Ling (凌氤寶), a top policymaker of the Financial Supervisory Commission (FSC).
While giving a lecture on "The local insurance industry's future development" at the Non-Life-Insurance Association of the ROC (
He added that the establishment of captive insurance companies will create business opportunities -- instead of competition -- for local insurance firms, which could benefit the overcrowded insurance sector.
A captive insurance company is an insurance company that has been set up to provide coverage at a lower cost than is available in the general insurance market. The company's stock is controlled by one investor or a group of investors to provide coverage for their business operations.
A captive insurance company may be a non-admitted, non-resident, or foreign insurer.
Sometimes it can provide reinsurance to a self-insured or domestic company.
Ling also urged local insurers to focus on core businesses in order to guarantee their survival while developing insurance-related industries and branching into Asia-Pacific markets.
The commission had previously vowed to turn Taiwan into a regional financial-services hub by transforming one to three domestic insurers into regional key players in the Asia-Pacific market.
The local insurance sector is overcrowded, with a total of 56 players -- including 29 life-insurers, 26 non-life-insurers and one re-insurance company -- and needs to be further consolidated through mergers and acquisitions, he said.
Although total insurance premium income quickly grew from NT$990.6 billion in 2002 to last year's NT$1.24 trillion, many players in the industry are suffering losses, Ling said.
"To generate reasonable profits is the top priority for insurers, which will support their efforts in product innovation and quality services," Ling said, adding that doing so will help local insurers escape a detrimental price war.
Ling said the importance of innovative efforts to launch tailor-made insurance products such as pension insurance, death insurance and medical insurance in groups for life insurers, or fire insurance and joint accidental insurance for non-life insurers.
Concluding yesterday's lecture, Ling said that his commission has mapped out measures to assist with the local financial sector's internationalization.
The measures include the establishment of an international advisory board to speed up the nation's financial reform progress and compliance with international regulations.
The commission also plans to organize financial industry round-table meetings in the near future, so as to fine-tune the government's financial policies by taking advantage of local financial gurus' expertise, while dispatching foreign missions to learn from other international financial players.
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