TAIPEI: Taiwan’s worst Covid-19 outbreak has left the island’s insurers bracing for more than US$1bil (RM4.4bil) in claims that the financial regulator is urging them to honour.
The head of the Financial Supervisory Commission (FSC), Huang Tien-mu, has ordered insurers to pay out on valid Covid-19-related insurance policies after they faced criticism from lawmakers for dismissing claims, cancelling policies and delaying payouts.
Insurers are looking to limit their losses on policies after underestimating the extent of the disease.
There are currently more than 6.3 million still-active Covid-19-related policies and another million waiting for approval, according to the FSC.
This year, insurers have already paid out more to customers – NT$2.6bil (US$89mil or RM390mil) – than the NT$2.1bil (RM314mil) in revenue they have received from premiums.
And with only around 2% of policies subject to claims so far and Taiwan’s outbreak showing no sign of abating, insurers are facing a wave of further claims in June and July.
Speaking to lawmakers last Monday, Huang said payouts will likely be higher than the NT$41bil (RM6.1bil) estimate mentioned by lawmakers.
While that is just a tiny fraction of the NT$2 trillion (RM299bil) in net assets held by Taiwan’s insurance industry, the majority of those are held by the large life insurers.
The potential claims represent around 25% of the assets held by property insurance companies, which were among the most active in selling Covid-19 policies.
Property insurers, which focus primarily on car protection, have struggled to find growth in recent years and saw Covid-19 as a great opportunity, according to Andy Chang, director of Taiwan Ratings Corp.
When working out their risk models, many miscalculated the potential number of cases by a factor of almost 100. They also didn’t adequately estimate the necessary capital buffer.
“They shouldn’t have just said, ‘how much are our competitors selling? We want to sell that much too,’” Chang said in a phone interview. — Bloomberg