HONG KONG: Earthquake-related claims for Taiwan’s commercial insurers related to this month’s seismic event are unlikely to exceed those stemming from the 2016 Meinkong earthquake, given the more recent event’s greater distance from the economic centers and science parks, according to AM Best.
The Best’s Commentary, “Taiwan Earthquake Claims Unlikely to Exceed 2016 Levels,” notes that the Magnitude 7.2 earthquake on 3 April is not expected to add significant net claims and lead to a capital event for Taiwan’s non-life insurance industry.
In Taiwan, residential earthquake losses are ceded to the Taiwan Residential Earthquake Insurance Fund (TREIF), so commercial insurers mainly bear commercial and industrial losses, according to the report. Most prior major earthquakes in Taiwan resulted in claims to commercial insurers for industrial losses. More generally, significant losses for the latest event could arise from business interruption coverage. This is due to the material role the technology and science sectors play in Taiwan’s overall economy, combined with large insureds purchasing adequate insurance protection, with the vast majority of these exposures ultimately being ceded to the international reinsurance 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, analytics, 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%.”
Standalone credit quality and the ability to withstand major catastrophe losses vary by company, but some insurers’ overall credit fundamentals are supported by strong parental financial support as per regulations.-Bernama
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