Taiwan is the second largest market in the Asia-Pacific region after Japan in terms of insurance density. However, it was reported by Asia Insurance Review on 28 August 2013 that the combination of persisting low interest rates, sluggish business growth, weak underlying profitability and increasing competition have driven Taiwanese life insurers to invest more in high risk assets, such as real estate, securities with higher potential profit margin and overseas assets.
By shifting investments to high risk assets to offset the negative impact of the low domestic interest rates, concerns have been raised that life insurers that have adopted this high risk investment model are now vulnerable to fluctuations in the real estate market, potential price corrections and overseas securities markets which may be extremely detrimental to these insurers.
The pressure on Taiwanese life insurers is further intensified by increasing competition within the industry, for example, banks are expanding into life insurance through acquisitions and life insurers controlled by financial holding groups are diversifying their distribution channels of life insurance to sources other than bancassurance.
For further details of the struggle currently faced by the industry, please refer to the newsletter published by Asia Insurance Review here
Source: Asia Insurance Review, Moody’s Investors Service