Despite outstanding financial results from insurance players, the Taiwanese insurance industry’s growth is moving at a “snail’s pace”, according to a study by GlobalData.
Taiwan’s insurance industry recorded a 2021 pre-tax profit of US$14.15 billion, based on data from its regulator, the Financial Supervisory Commission. The life insurance segment’s profits reached US$13.37 billion, an 88.5% year-on-year increase. Meanwhile, non-life insurers logged US$780 million in profit for 2021, growing 32.9%.
With growing demand foreign-currency-denominated investment products and Taiwan’s ageing population, life insurance growth is expected to pick up in 2022. However, GlobalData estimated that Taiwan’s life segment will only grow at a compound annual growth rate (CAGR) of 0.4%, from US$107 billion in 2020 to US$121.2 billion in 2025 in terms of direct written premiums (DWP).
Deblina Mitra, senior insurance analyst at GlobalData, said that after contracting in 2019 following years of slowdown, the life insurance segment further contracted in 2020. Mitra said this was mainly due to persistently low interest rates and capital market fluctuations that reduced yields from insurance investment products, lowering their demand. The trend continued in 2021 with a decline of 5.9%.
The report said the decline was most noticeable in the whole life, term life and endowment business lines, which collectively accounted for 75% of the life insurance DWP in 2020, with a decline of 11.1%.
In response, the Taiwanese regulator increased the limit for life insurers who are operating in foreign-currency-denominated insurance businesses, which offer better returns compared to the Taiwanese dollar, from 35% to 40% in June 2021.
“Taiwan’s life insurance industry’s growth momentum is expected to remain subdued over the next five years as challenges related to adverse market conditions, declining working-age population, and an existing mature market will continue to oppress the demand,” Mitra said. “The demographic shift towards the super-ageing population is expected to be a focus area for insurers with more products being launched targeting this age group.”
While the general insurance segment registered a larger CAGR than the life segment, GlobalData said that it is inconsequential, as general insurance penetration in the market is very low.
The general insurance segment currently has a projected CAGR of 6.7% until 2025, growing to US$10.4 billion in gross written premiums. However, Mitra said that despite Taiwan being a developed economy, the general insurance penetration rate is at 1%, which is way below the developed markets’ average of 4%.
On the brighter side, the low penetration provides ample room for the growth of the insurance industry.
“Stable economic factors coupled with the government’s initiatives to expand the general insurance industry through new product development are expected to support its growth over the next five years,” Mitra said.
