Best’s Commentary: Spike in Pandemic-Related Claims in Taiwan Could Create Capital Event for Some Non-Life Insurers

HONG KONG--(BUSINESS WIRE)--A spike in claims due to a COVID-19 resurgence could lead to a capital event for some of the island’s non-life insurers with in-force pandemic-related insurance products, according to a new AM Best commentary.

In a new Best’s Commentary, titled, “Spike in Pandemic-Related Claims for Taiwan’s Non-Life Segment,” AM Best notes that the magnitude of the impact of COVID-19 claims on individual companies vary widely and are dependent on underwriting exposures relative to capital size, policy terms and conditions, reinsurance strategies and risk accumulation management. The pandemic policy gained significant traction when it was introduced in early 2021. Since the rapid spread of the Omicron wave in Taiwan in April 2022, all pandemic products (apart from some vaccine covers) have been withdrawn as per the Financial Supervisory Commission’s latest update.

AM Best notes that the mismatch in insurers’ ability to adjust risk exposures from the pandemic is a major driver of a potential capital event from this new product, when the government shifted its stance from a zero-COVID policy to a live-with-COVID policy. The loss ratio on the pandemic product as of early June 2022 already has exceeded 100%. AM Best expects that the industry’s total claims will continue to rise and add underwriting loss pressure on non-life companies for full-year 2022, including for those insurers that do not see this leading to a capital event.

“For insurers that may face capital erosion pressure, many of them have financial holding companies as parents or major financially strong shareholders. AM Best expects that they will receive capital support and benefit from their parent’s financial flexibility to withstand the difficult year,” said Christie Lee, senior director, AM Best.

Ultimate industry claims and the overall impact on Taiwan’s non-life insurers remain highly uncertain as the pandemic situation continues to develop and the government’s policy on handling COVID-19 changes.

“Although not final, a potential game changer could be a government downgrade of COVID-19 from the current tier-5 pandemic classification to tier-4. Depending on the policy terms and conditions, this could potentially lower claims payout materially, which could save insurers from a major capital event,” said James Chan, associate director, AM Best.

To access the full copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=320765.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2022 by A.M. Best Company, Inc. and/or its affiliates. ALL RIGHTS RESERVED.