Taiwanese insurers are gearing up for significant regulatory shifts with the implementation of the International Financial Reporting Standard (IFRS 17) and the localized Insurance Capital Standard (TW-ICS) set for January 2026, according to Fitch Ratings.
These regulations will introduce a mark-to-market valuation for assets and liabilities and enforce stricter capital requirements, increasing the confidence level for capital calibration from 95% to 99.5%.
In response to these new demands, insurers are revising their asset allocation strategies to enhance asset-liability matching and strengthen capital reserves. Many are prioritizing higher-margin protection and health products to improve their contractual service margins (CSM) and mitigate the impact of interest rate fluctuations.
Furthermore, insurers are issuing capital-qualifying bonds to solidify their financial footing. Taiwan’s Financial Supervisory Commission (FSC) has established a 15-year phase-in period for the new solvency regime, allowing insurers to adapt gradually to the heightened standards.
However, Fitch Ratings foresees challenges for insurers as they navigate interest rate, foreign exchange, and commercial real estate risks under TW-ICS. In light of these obstacles, insurers are expected to continue reshaping their investment strategies and business portfolios to alleviate potential risks.
To address the anticipated increase in capital charges on equity and real estate investments, insurers have been diversifying their portfolios, issuing both Taiwan dollar subordinated bonds and US dollar-denominated tier 2 subordinated bonds since 2023. This strategy aims to bolster their capital positions and ensure compliance with TW-ICS requirements. Fitch predicts that insurers will seek to raise additional equity and maintain their issuance of capital bonds both domestically and internationally.
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