Analysis: Insurance market heating up

Following New York Life's move, American International Group Inc (AIG) announced in February this year a share-swap deal to gain full control of Central Insurance Co (中央產險). The acquisition, which valued the Taiwanese firm at US$190 million, was completed in August.

International insurers believe now is the right time to inject capital into the local market for surefire investment returns given that industry risks are medium and interest rates have fallen to international standards of between 2 percent and 3 percent, Taiwan Ratings' Chu said.

According to official data, Taiwan's insurance industry, with life and non-life insurances combined, saw its biggest growth in 2003, when total premium income collected jumped 25.38 percent year-on-year.

Premium income rises

Last year, premium income continued to post double-digit growth at 10.69 percent to reach NT$1.58 trillion (US$47.5 billion) despite fierce competition, the Insurance Bureau's statistics showed.

As of July, there were 57 insurers vying for market share among the nation's 23 million people, including 39 local players, 16 foreign companies and 2 reinsurance firms.

Despite the increasing competition, local insurers said they see abundant opportunities in developing asset management and the pension market, especially through the existing distribution networks of local banks.

"Bancassurance is relatively new in Taiwan," said Lee Lih (李立), head of the investment department of First Financial, whose life insurance joint venture with Aviva is expected to start operations next year.

With Taiwan transforming into an aging society, there could be synergy created by selling investment-linked insurance policies via banking branches, she added.

As such, First Financial last year disposed of its property-insurance unit Mingtai Fire and Marine Insurance Co (明台產險) to Mitsui Sumitomo Insurance Co, Japan's second largest property and casualty insurer, for a lump sum of NT$8.4 billion in cash to facilitate its concentration on life insurance and banking business.

ING Antai (ING安泰人壽) also vowed to place greater emphasis on wealth management and pension programs as major policyholder needs have shifted from life insurance to savings, and will turn to asset management in the near future, according to CEO John Wylie when he took office in February this year.