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Taiwan Insurance Report Q1 2012
Business Monitor International, Jan 2012, Pages: 85
Business Monitor International's Taiwan Insurance Report provides industry professionals and strategists, corporate analysts, insurance associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Taiwan's insurance industry.
The past development of Taiwan’s insurance sector reflects a combination of factors. Like much of East and South East Asia, Taiwan’s savings rate is high: over the long-term, the island has consistently run a current account surplus. As in Japan, life insurance is well established as a conduit for savings in a country where financial markets have, by some metrics, been under-developed. This is partly because of tax breaks that support usage of insurance, and partly because of the strong brands and distribution networks of the major companies. Taiwan is unusual in that Chunghwa Post (which is analogous to Japan Post in Japan and La Poste in France) is a major player in the life segment. As a result of these various factors, the life insurance segment is huge. Premiums are about twice those of Australia, a country whose population and economy are of similar sizes to those of Taiwan and a country that is not lacking in large and dynamic financial services companies.
However, Taiwan also has much in common with South Africa or Israel in that geo-political issues have resulted in the sector being dominated by massive local financial services conglomerates. In Taiwan and in the other two countries, the conglomerates have – for much of their history – had limited access to foreign capital – so they have been built around intricate cross-shareholdings and commercial relationships within the national boundaries. The absolute size, relative size, access to capital, brand and distribution networks of the massive Taiwanese financial services conglomerates – Cathay, Fubon and Shin Kong – which own the eponymous life companies and associated non-life companies, make them formidable competitors. Nevertheless, it has clearly been possible for major foreign multi-nationals to build very substantial businesses on the island – in both life and non-life insurance.
Overall, then, it is fair to say that Taiwan’s insurance sector is like no other. Life premiums have been suppressed in 2011 –but mainly because the various players have focused on profitability rather than market share for its own sake. Some companies have emphasised particular products; others, particular distribution channels. Nevertheless, it is clear from the reports of Cathay Financial and Fubon, for instance, that life premiums actually shrank over the course of the year: in this respect, Taiwan is very unusual. Amazingly for a non-life market with high per capita income, the growth of the non-life segment is being driven by motor insurance. For several foreign companies (especially in the life segment), Taiwan has become a market that they would rather no longer be involved with: however, some of the organisations that are leaving are doing so because of problems in their home countries. In some ways, the absolute size of the Taiwanese insurers is a disadvantage. Although they are expanding beyond the confines of the island (most notably in mainland China but also in Vietnam), their overseas operations are still tiny – and not able to offset the impact of the slowdown at home. Moreover, the massive Taiwanese life companies have significant exposures to bonds in the Euro area.
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