Recently released market study: Taiwan Insurance Report Q3 2013

As of mid-2013, BMI continues to see Taiwan's insurance sector as standing out from its peers in other countries for two reasons. The first is that, by many metrics, density (ie premiums per capita) in particular, the country is an exceptionally highly developed market for insurance. A country that for much of the last 30 years has consistently run a current account surplus has mobilised savings substantially through a life insurance segment that is dominated by massive domestic financial conglomerates. 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. Chunghwa Post - the local counter part of Japan Post Insurance or La Poste in France - is also an important player in the life segment. In essence, the competitive landscape has been shaped by Taiwan's peculiar political situation. Like their South African and Israeli counterparts, the Taiwanese financial giants have had limited access to foreign capital for much of their history - and have had to engage in complex deal making within the national boundaries. Nevertheless, as Allianz and - under AIG's ownership - Nan Shan have shown, it is possible for foreign companies to build very substantial businesses in Taiwan.

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However, the latest newsflow tends to emphasise the challenges rather than the opportunities. Absolute growth in both segments is, by many metrics, quite slow. Crucially, many of the leading life companies have been focusing on particular products or distribution channels in order to boost profitability. This is at a time that most of the life insurance companies are earning investment returns that are similar to (and indeed, in some instances, lower than) the cost of funding. Towards the end of last year, HSBC Insurance announced that it would sell its operation in Taiwan to Allianz as a part of a regional bancassurance deal. Some of the giant local life companies have been substantial investors to eurozone bonds - although some, at least, have been reducing exposures to Spain and other peripheral countries.

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