The liberalization of commercial motor insurance premium rates will limit insurers' ability to improve their margins, leading to slower surplus growth, the rating agency noted.
It expected insurers to instead turn to fresh capital -- from either equity raising or issuing of capital supplementary bonds -- to strengthen solvency adequacy.
By the end of the first quarter, the comprehensive solvency ratios for the entire insurance market and the non-life sector amounted to 245 percent and 272 percent, respectively, Fitch cited data from the regulator.
While the solvency position of the non-life sector remains solid, the net premium leverage of major insurers rose in 2018 as premium expansion continued to outpace surplus growth, which has damaged smaller insurers' solvency stability.
Fitch expected the ongoing motor insurance pricing reform to challenge motor insurers' ability to maintain their underwriting result or to achieve breakeven in underwriting margins in the short term.
Scale advantage, however, has allowed major non-life players to sustain their combined ratios below 100 percent, the agency added.
"Many insurers sought to enhance their earning stability and diversify their earning profile by expanding into non-motor product lines.
Fitch believes that pricing competition in the non-motor business could intensify if growth in motor insurance further slows," the report said.