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Taiwan’s life insurers issuing capital qualifying bonds in response to TW-ICS/IFRS 17

Written by Adam Cadle
17/10/2024

Taiwan’s life insurers are issuing capital qualifying-bonds and optimising investment strategies to strengthen their capital position in response to the implementation of the country’s Insurance Capital Standard (TW-ICS) and IFRS 17 in 2026.

Fitch Ratings said the new capital regime, imposing higher capital requirement standards and new accounting rules, will push life insurers to enhance their capitalisation and to exercise effective asset-liability management. Taiwan’s Financial Supervisory Commission has introduced a series of localised adjustments and transitional measures over a 15-year phase-in period from 2026.

Interest-rate risk remains a key challenge for Taiwanese life insurance companies. They have been shifting towards higher-margin protection and health products to boost their contractual service margin and reduce sensitivity to interest-rate movements.

Fitch added: “Hedging cost is one of the key determinants for life insurers’ profitability. We expect them to continue to evaluate their FX exposure and to assess the limits of their FX risk tolerances, notwithstanding the new rules on foreign-currency volatility reserves to allow insurers more operational flexibility.”



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