According to a new AM Best report, a spike in claims due to a COVID-19 resurgence could lead to a capital event for some of Taiwan’s non-life insurers, with in-force pandemic-related insurance products.
In the rating agency’s new commentary – Spike in Pandemic-Related Claims for Taiwan’s Non-Life Segment, they highlight that Taiwan’s non-life insurance segment is experiencing a spike in claims due to the resurgence of COVID-19 cases since mid-April.
According to FSC statistics, the total number of in-force pandemic insurance policies is currently estimated at approximately 7.6 million, relative to a population of 24 million.
However, AM Best notes that the magnitude of the impact of COVID-19 claims on individual companies varies widely, and are also dependent on underwriting exposures relative to capital size, policy terms and conditions, reinsurance strategies, and risk accumulation management.
In addition, 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spread of the Omicron wave in Taiwan in April 2022, all pandemic products (apart from some vaccine covers) have been withdrawn as per the Financial Supervisory Commission’s latest update.
Although the industry loss ratio of the pandemic products as of early June 2022 has already 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 the full year of 2022, including insurers that do not see this leading to a capital event.
Nonetheless, AM Best expects the industry to continue maintaining its focus on profitability and be able to achieve operating margins for non-COVID business, similar to levels prior to the surge in COVID-19 infections.
Christie Lee, senior director, AM Best, commented: “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.”
Furthermore, AM Best noted that it expects that the ultimate industry claims remain highly uncertain as they are subject to the ongoing development of the pandemic situation, the potential emergence of new and more contagious variants over the next few months, as well as any changes to the government’s policy on handling COVID-19.
“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.
However, according to another recent report from AM Best, US property & casualty (P&C) insurers’ metrics have been largely unaffected by COVID-19.
