Taiwan's non-life insurers unlikely to see big quake claims – AM Best

Some insurers could benefit from robust parental financial support, as mandated by regulations.

The seismic event that struck Taiwan earlier this month is not anticipated to result in earthquake-related claims exceeding those observed during the 2016 Meinong earthquake, AM Best said.

Despite the magnitude 7.2 earthquake on 3 April, its greater distance from economic hubs and science parks suggests that commercial insurers are unlikely to face significant net claims or experience a capital event within Taiwan's non-life insurance sector.

In Taiwan, residential earthquake losses are typically absorbed by the Taiwan Residential Earthquake Insurance Fund (TREIF), leaving commercial insurers primarily responsible for covering commercial and industrial losses. 

Historically, major earthquakes in Taiwan have resulted in claims related to industrial losses for commercial insurers. However, the potential for substantial losses stemming from the recent seismic event primarily lies in business interruption coverage. 

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This is due to the critical role played by the technology and science sectors in Taiwan's economy, with many large insured entities opting for comprehensive insurance coverage, a significant portion of which is reinsured in the international market.

“The non-life segment’s capitalization was weakened from a large operating loss in 2022 due to pandemic insurance,” said Christie Lee, senior director, of analytics at AM Best. 

“The industry’s capitalisation rebounded in 2023 after capital injections from insurers’ parent companies, coupled with favourable operating results, but remain below 2021 industry capital levels by 21%.” she added.

The ability of insurers to withstand major catastrophe losses and their standalone credit quality varies across companies. Nevertheless, some insurers benefit from robust parental financial support, as mandated by regulations, bolstering their overall credit fundamentals.