Sustained domestic transmission of SARS-CoV-2 would worsen COVID-19-pandemic-related losses for Taiwan’s non-life insurers this year and end the sector’s 21-year profit streak, Taiwan Ratings Corp (中華信評) said yesterday.
The sector is likely to report an overall underwriting loss this year due to COVID-19 coverage, thus terminating the sector’s long profitable streak, the local arm of S&P Global Ratings said.
“We see considerable uncertainty over the potential claims facing non-life insurers,” Taiwan Ratings credit analyst Patty Wang (王珮齡) said, adding that heavy losses seem likely and could negatively affect capitalization for insurers without proper capital restoration plans.
Photo: Cheng I-hwa, Bloomberg
The risks are particularly evident for insurers with the greatest number of outstanding pandemic policies, Wang said.
The biggest uncertainty insurers face is how many policyholders are infected before their pandemic policies mature, and whether regulators would downgrade the status of the Omicron variant of SARS-CoV-2 as a reportable transmissible disease, which would reduce the required payout, she said.
Though local insurers have sufficient liquidity to withstand the potential outflows from pandemic insurance claims, adequate capital planning would become increasingly important for players with large pandemic insurance exposures and those with insufficient capital strength, Wang said.
Taiwan’s non-life insurers generally have a smaller capital base than life and non-life insurers overseas, she said.
“While most Taiwanese non-life insurers have sufficient risk controls, as well as a manageable risk appetite, some companies still display the need to step up their risk framework and discipline, as the pandemic lesson revealed,” Wang said.
Local non-life insurers by and large have sufficient reinsurance coverage for their catastrophe risk exposure and have put up decent showings from their non-pandemic business lines, Wang said.
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