Property insurers operating in Taiwan are projected to maintain profitability in the aftermath of a recent 7.2 magnitude earthquake that struck the country's eastern coast, according to data and analytics firm GlobalData.
The earthquake, which inflicted significant damage – particularly in Hualien, where collapsed buildings and infrastructure disruptions occurred – presents notable challenges to the insurance industry. Nonetheless, analysts anticipate that government-supported initiatives will help alleviate losses.
GlobalData said insurers may need to reassess their risk exposure and adjust premiums to sustain profitability in the wake of this seismic event.
Aarti Sharma, insurance analyst at GlobalData, pointed out that Taiwan is situated in one of the world's three major seismic regions, making it vulnerable to natural disasters, particularly earthquakes.
“Being located in one of the three major seismic regions globally, Taiwan is prone to natural calamities, especially earthquakes. As a result, the penetration of earthquake insurance is moderately high in Taiwan, and the current earthquake is expected to result in high claims for local insurers and reinsurers,” she said.
According to data from GlobalData's Global Insurance Database, property insurance claims are estimated to represent an 11.6% share of total general insurance claims in 2024, amounting to TWD14.1 billion ($0.5 billion). However, the actual claims for 2024 may exceed this projection once the full impact of the earthquake is assessed.
Despite these potential losses, the overall profitability of Taiwan's general insurance industry is not anticipated to suffer significantly. The average loss ratio for property insurance has remained relatively low at 31.5% during the period from 2019 to 2023. Furthermore, the majority of losses will be absorbed by the Taiwan Residential Earthquake Insurance Fund (TREIF), which was established by the government in 1999 to bolster the country's earthquake insurance framework.
Sharma forecasts that the property insurance sector will experience growth, with gross written premiums (GWP) increasing from TWD51.8 billion ($1.7 billion) in 2024 to TWD66.8 billion ($2.2 billion) by 2028, reflecting a compound annual growth rate (CAGR) of 6.5% over the period from 2024 to 2028.
The significant impact of the recent earthquake on residential and commercial properties is expected to drive demand for fire and natural hazard policies that include coverage for earthquakes in 2024 and 2025. Fire and natural hazard policies are projected to account for an 80.4% share of total property insurance gross written premiums (GWP) in 2024.
Meanwhile, a real estate firm brought to light the fact that a significant portion of Taiwan's stock lacks comprehensive earthquake insurance.
