Moody's Investors Service said in a report published yesterday that the outlook for Taiwan's property & casualty (P&C) insurance industry is stable, though a slowing economy combined with the industry's limited growth prospects mean that it will likely remain highly competitive in the near term.

Additionally, in order to sustain their profitability levels, insurers will have to adhere to prudent underwriting discipline, according to the report.

"Although market competition is keen, investment environment unfavorable and the economy weakening, these factors have been offset by strong risk-adjusted capitalization, low financial leverage, business opportunities arising from large government-proposed infrastructure projects, and a track record of satisfactory underwriting performance," said Daniel Wong, a Moody's associate analyst and author of the report.

"To stay competitive, some insurers will distinguish themselves through non-price competition, such as greater emphasis on brand development, wider product offerings, more diversified distribution channels and improved efficiency of claims handling," Wong added.

The report also notes that thanks to its limited exposure to overseas investments and structured products, the direct impact of the global financial crisis on Taiwan's P&C insurance sector has been limited.

In general, the industry is strongly capitalized with most players maintaining risk-based capital ratios well above the minimum regulatory requirement.

This strong capital base will help the industry navigate through a tough operating environment and withstand a certain degree of earnings volatility resulting from volatile investment income.

The report - "Taiwanese Property & Casualty Insurance Industry Outlook" - can be found on www.moodys.com.

Reuters

(HK Edition 01/23/2009 page16)