Taiwan Insurance Report Q2 2008

As was the case in Q108, the main focus of this report is BMI's proprietary Insurance Business Environment Rating (IBER). The rating brings together a number of pieces of relevant quantitative data, together with BMI's Country Risk Rating (CRR). The IBER makes it easier for the business environment's insurance sector in a particular country to be compared with the business environment for any other industry in that country that is surveyed by BMI. The IBER also allows an objective and meaningful comparison of the business environment for the insurance sector in one country with the business environment for insurance in another country.

Over the coming months, we will substantially change the format of the BMI insurance reports. In essence, we will focus to a much greater extent on the companies that are active in the non-life and life segments.

Taiwan's IBER is 68.8. Relative to other countries in the Asia Pacific region, it is an attractive insurance market for foreign insurers. As is not unusual in the region, the IBER is held back by the lack of a supporting legal framework and the opaque regulatory bureaucracy.

The feature of Taiwan's insurance market is the large absolute size of its life segment.

The economic situation, being as dependent as it is on exports, raises concerns. On the other hand the Chinese economy continues to grow strongly and the Chinese market may well counterbalance any decline in Western demand, especially from the United States.

Over the forecast period, we anticipate that non-life premiums will grow by 12% annually in local currency terms and by 14% in US dollar terms. Life premiums are expected to increase by only 1% annually in local currency terms and by 3% in US dollar terms. The key drivers of growth in the non-life segment in 2007-2012 are the anticipated rise in nominal GDP from around US$378.93bn to US$566.40bn and an expected increase in non-life penetration from 2.47% of GDP to 3.20%. The key driver of growth in the life segment is the envisaged rise in life density from US$1,926.84 per capita in 2007 to US$2,200 per capita in 2012. Taiwan's total population is expected to grow marginally from 23mn to 23.37mn in the same period.

At present the life sector is almost five times as large as the non-life market. Over the forecast period, however, the much faster rate of growth in non-life business will see the life business reduced to just 2.8 times as large as the non-life segment by the end of 2012.

In general, Taiwan is a relatively low-risk insurance environment.