A Message from the Chairman

Jeremy Kan
Jeremy Kan

Founded in 1985, Taiwan Insurance Institute (TII) celebrated its 38th anniversary last year. To serve the insurance industry, which is a vital component of the financial system, TII continues to improve the information platform it has built for the insurance market, promote risk management and insurance-related knowledge, and enhance consumer protection. As a think tank of the industry, TII engages in professional research, provides actuarial results and statistics, assists the regulator in formulating industry development strategies and improving regulatory efficiency, to foster better public-private partnerships. In addition, TII contributes to the sustainable development of the insurance industry by studying and analyzing international insurance data to guide the development of the domestic industry and empower insurance professionals and global talents to keep up with the latest practices.

In 2023, the global economy was on its way to recovery as the COVID-19 pandemic eased, and globally, the insurance industry was committed to tackling challenges posed by emerging risks. However, due to geopolitics, monetary policy, and interest rates maintained by central banks, risks to the global macro economy will continue to have implications for the development of the insurance industry as a whole in the short term. Meanwhile, extreme weather caused by climate change and global warming have resulted in significant losses of life and property in countries at varying stages of political and economic development. Therefore, the relationship between climate-related risks and the sustainable development of the human society has become an issue of concern in the global financial market. In line with the Financial Supervisory Commission’s “Green Finance Action Plan 3.0”, TII works with the Taiwan Academy of Banking and Finance (TABF) and the Securities and Futures Institute (SFI) to promote the adoption of global trends in sustainable finance and help local businesses in the financial and insurance sectors adapt to climate change and ESG-related risks. With the first “Sustainable Finance Assessment” already completed in 2023, it is expected that the power of the financial and insurance industries could be leveraged to promote industrial upgrade and green energy development in Taiwan, so that the country is better positioned to meet challenges arising from the global transition to sustainable finance.

Regarding the domestic insurance industry in 2023, the U.S. Federal Reserve’s monetary policy had significant implications for fluctuations in the asset value of the insurance industry. In addition, inflation in many advanced countries either directly or indirectly drove insurance claims costs higher. Furthermore, claims loss due to frequent outbreaks of natural disasters around the world also resulted in higher reinsurance costs. Fortunately, Taiwan’s insurance industry posted stable revenues and earnings once again, as the pandemic abated. An observation of the domestic insurance market shows higher public awareness of risks, and so insurers began to review policyholders’ risk planning and help them close protection gaps. This is beneficial for motivating insurers to promote protection-oriented products and for driving the growth of premium income.

Over the past year, TII has been actively fulfilling our missions to assist the regulator in guiding the insurance industry in the process of adopting IFRS 17 and in building a new-generation insurance solvency regime. TII has completed several projects as part of the task force platform for adopting the two systems. .

To prepare for the adoption of IFRS 17, the task force has been proposing draft revisions to relevant regulatory letters and orders in accordance with the proposed amendments to relevant sub-laws as announced by the competent authority since 2023. To ensure tax stability once IFRS 17 is adopted, the team has conducted tax-related research and reviewed laws and regulations related to stamp tax, business tax and profit-seeking enterprise income tax. Furthermore, the task force worked with non-life and life insurers to conduct trial tax calculations to identify factors that affect taxation and the extent of the effect. The first draft of recommendations to the tax authorities has been completed accordingly. In addition, the task force closely monitors the progress of information system building within insurers, checks on the completion of the systems against the insurers’ schedule, and prepares for an industry-wide parallel testing of all systems in 2024. Additionally, the task force monitors and manages the formulation of relevant guidelines and standards set by the Actuarial Institute of Chinese Taipei, as well as the effectiveness of the IFRS 17-related seminars and training courses held by TII.

To support the competent authority in its effort to develop a new-generation solvency regime, TII over the past year has continued to track the latest updates in the Insurance Capital Standard 2.0 (ICS 2.0) by the International Association of Insurance Supervisors (IAIS) and implemented a three-year “parallel testing” project from 2022 to 2024, where the annual data provided by insurers are used to calculate the potential capital adequacy ratio once the new system is in place. This offers important information for the competent authority to formulate transitional and localized regulatory measures for when Taiwan adopts the new system.

Keeping a pulse on the development of the global insurance market is vital, as the domestic industry is closely tied to the global market. Therefore, TII actively expands our exchange and cooperation with international insurance institutions or organizations. As of the end of 2023, TII had signed memorandums of understanding and formed partnerships with 11 international organizations. By actively participating in international conferences, discussing the latest issues in the global market, and furthering interactions with international professional institutions and regulators, TII has been facilitating the domestic industry to keep up with global trends and further engage with the world. In particular, the latest topics addressed at the 2023 annual meeting of the IAIS can provide new guidelines for the future development of Taiwan’s insurance industry:

  1. Continuing to promote policies and issues related to the Insurance Capital Standards (ICS);
  2. Closing protection gaps and enhancing the resilience of the insurance industry through public-private collaboration;
  3. Keeping a close watch of constantly changing risks in the world, such as political and economic dynamics, inflation, monetary policy, credit risk and liquidity risk, etc;
  4. Making sure to reduce information gaps and heeding risks of greenwashing in the disclosure about sustainable development and climate-related measures;
  5. Implementing the concept of “customer-centric outcomes”: Meeting customer needs amid social changes (e.g., aging population, technological applications); innovating and developing customer-centric products throughout different product lifecycles.

Regarding the future development of the insurance industry, life insurers in Taiwan will be facing major challenges to product structure transformation, company’s operating strategies, and capital adequacy, as IFRS 17 and ICS 2.0 are to be adopted in 2026. Emerging trends such as population aging and health management could create new opportunities for protection-oriented products or changes in the demand for financial products. Meanwhile, key factors for the development of the property and casualty insurance market include existing challenges, such as the contracting underwriting capacity of the global reinsurance market and the sharp rise in natural disaster-related risks caused by extreme weather, as well as the potential impact of Insurtech resulting from cross-industry alliances. However, with these challenges also come opportunities for industry development.

Insurance is a vital component of the social safety net, and insurers are obligated to prioritize the rights and interests of policyholders. Driven by the founding purpose of TII, all supervisors and colleagues shall continue to work hard and offer service proactively to support the regulator and insurers. The TII team will strive to further the common interests of the insurers, the insured and the public, to enable the sound development of the insurance industry and create new opportunities.

Jeremy Kan