Local insurers might see a decline in their capital adequacy because of high payouts to holders of COVID-19 insurance policies amid a surge in domestic infections, the Financial Supervisory Commission (FSC) told a meeting of the legislature’s Finance Committee in Taipei yesterday.
The commission did not disclose the total amount that insurers might have to pay policyholders, saying only that about 6 million COVID-19 insurance policies remain valid and that the compensation amount has not been finalized.
Democratic Progressive Party Legislator Kuo Kuo-wen (郭國文) said that since the Central Epidemic Command Center (CECC) has estimated Taiwan’s infection rate to be about 15 percent, it is likely that 15 percent of the policyholders, or 900,000 people, would contract COVID-19.
Photo: Tu Chien-jung, Taipei Times
If each infected policyholder is to be compensated NT$100,000 (US$3,392) — NT$50,000 for being infected and NT$50,000 for being quarantined — compensation would total NT$90 billion, Kuo said.
The commission said that insurers must fulfill their obligation to holders of COVID-19 policies, but also evaluate the impact of compensation on their financial strength.
Presently, the capital adequacy of all insurers is satisfactory, but a rise in local cases might place pressure on some, it said.
If an insurer’s capital adequacy falls below the minimum, a capital injection would be obligatory, but the commission would allow the insurer to utilize its special reserve to write off the loss, FSC Chairman Thomas Huang (黃天牧) told the meeting.
Local insurers have to set aside a combined reserve of NT$16.1 billion for major accidents and another reserve of NT$32 billion for volatility, Huang added.
“If the number of local cases surpasses 3 million, as forecast by the CECC, some insurers might be compelled to increase capital,” Insurance Bureau Director-General Shih Chiung-hwa (施瓊華) said.
The commission said it would not ask insurers to relax their compensation terms to reduce their financial burden.
Huang said that he would not use the word “crisis” to describe the situation, but it needs to be tightly monitored.
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