Written by the editorial team of Today Magazine
2022 will certainly not be a good year for the insurance industry.
Taiwan’s property insurance storm is still in the final stage of clearing up the battlefield. In the end, it will pay 60 billion yuan and 80 billion yuan? It is still as high as 100 billion yuan, and it is still wrestling, but the life insurance company on the other side is already brewing a storm that may be closer and more violent…
As the U.S. Federal Reserve started a cycle of interest rate hikes, triggering a pullback in global financial asset prices, according to the Financial Regulatory Commission, by the end of April this year, the net worth of Taiwan’s overall life insurance industry had evaporated by more than 1 trillion yuan, from 2.7 trillion yuan to the remaining 1.69 trillion yuan. Yuan, a decrease of nearly 40%, and the overall industry net worth ratio is only regarding 5.5%, which is not too far from the legal bottom line of 3%.
According to the regulations of the Financial Regulatory Commission, the frequency of reviewing the capital status of life insurance is every six months. If the net worth ratio for two consecutive periods falls below 3%, or the capital adequacy ratio falls below 200%, it will be activated in accordance with Article 149 of the Insurance Law. According to the severity of the improvement measures, the Financial Supervisory Commission will start the capital increase from restricting commodities, proposing a capital increase within a time limit, and financial or business improvement, otherwise it will be forced to take over. Those who merge or merge, within 90 days following the expiration of the period, may be taken over, ordered to suspend business for clean-up or ordered to be dissolved, which is the so-called “early corrective measures”.
Therefore, insurance companies usually plan to increase capital as soon as there is a possibility of falling below the threshold, so as not to affect business development. Therefore, in early June, the Insurance Bureau of the Financial Supervisory Commission has received information from Shin Kong Life Insurance, Taishin Life Insurance, Sanshang Smith Barney Life, The capital increase application of 5 life insurance companies including First Gold Life and a foreign branch company totaled more than 20 billion yuan.
However, so far it is only the initial stage of raising interest rates. On June 15, the US Federal Reserve raised interest rates by 3 yards in one breath. Chairman Jerome Powell hinted that it may continue to raise interest rates by 7~7 in the second half of this year. 8 yards, is the “super tornado” of Taiwan’s life insurance industry regarding to blow up?
Most people probably did not expect that before IFRS 17, known as the big devil of the insurance industry, will be officially greeted in 2026, there will be a giant iceberg that is regarding to collide head-on, and some industry players may not be able to survive this. close? And if the insurance policies you use to reduce life risks and plan your future finances come from these red-alert insurance companies, of course you must be vigilant, because once the company falls, your policy rights are likely to be lost. !
Because life insurance companies hold many stocks and bonds, the most direct impact of interest rates on the life insurance industry is that once the interest rate rises, the price of a large number of bonds on hand will fall immediately.In addition, global stock markets have retreated sharply this year, and the benchmark U.S.Dow JonesThe decline has exceeded 15%.
In mid-June, the Fed not only raised interest rates by 3 yards in one go, but also hinted to the public that if inflation does not improve, it may raise interest rates by another 5-7 yards this year. Previously, the net worth has been wiped out by trillions due to the impact of interest rate hikes. Can Taiwan’s life insurance industry withstand this decline?
In particular, the overseas investment position of Taiwan’s life insurance industry is huge, and it is only in this US interest rate hike that the total net worth fell immediately because of the large position of US debt. “If the US continues to raise interest rates, the market price of this position will still be very high. Gotta fall!” a senior insurance scholar reminded.
Even the annual “Financial Stability Report” released by the Central Bank at the end of May warned once morest “overseas investment exposure of the life insurance industry”. The report cited that Taiwanese life insurance companies’ overseas investment accounted for as much as 90% of US dollar exposure. Apparently even the central bank took notice of the seriousness of the situation.
It’s just that it takes time for the elephant to turn around. If Taiwanese society spent more than ten years to develop this giant beast, now it may take longer to digest it. In the process, it must bear the double high pressure of interest rates and exchange rates. , And the tunnel of the long dark night has not seen the end of the dawn.
Source: “Today Weekly” No. 1331
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