February 20, 2005
Standard and Poor's announced the raising of its outlook rating for Taiwan's life insurance sector from negative to stable at the end of January. This better rating reflects improvements in operational performance within the industry that have happened as a result of both regulatory and market changes. The ratings firm says that the financial circumstances of Taiwan's life insurers are not expected to look too bad in the midterm.
Despite the good news, Standard and Poor's notes that, within a low-interest environment, the problem of negative interest margins between insurance policy debt costs and rates of returns on investments will continue to be a burden for Taiwan's life insurers, although it is no longer a serious problem.
The firm says that, as the financial strengths of each life insurance company in Taiwan are different, intense competition and market changes will continue to present challenges. It says however that the efforts of life insurers to turn to lower risk operations and improve assets and debt management and that the market has room for expansion mean that these insurers should achieve stable performances.
Standard and Poor's says the chief reason for the improved outlook is that Taiwan's regulatory agencies have revised regulations in recent years. These revisions include permitting insurers to sell off products that are less sensitive to interest rates, encouraging insurance companies to put up more appropriate reserves, and relaxing investment restrictions on insurers.
(Central News Agency)
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