South Korean Life Insurers Maintain Stability Amid Regulatory Pressures
The Korean life insurance market recorded a combined net profit of KRW5.6tn ($4.26bn) in 2024, representing a 7.1% increase from the previous year. According to Gil Jo, an analyst at Moody’s Ratings, this growth was primarily driven by higher investment profits. However, net insurance profit declined by 15.7% year-over-year due to intense sales competition and stricter regulations that negatively impacted their net underwriting results.
“The strengthened regulations and declining interest rates led to a 21.7% reduction in insurers’ shareholders’ equity,” Mr. Jo noted. “Meanwhile, net investment profit showed notable improvement in 2024, increasing by 80.9%, mainly thanks to favourable capital market conditions, steady interest income, and lower finance costs.”
Despite the overall positive financial performance, most insurers faced a significant deterioration in their regulatory solvency in 2024. The life insurance industry’s average regulatory solvency ratio, or Korea Insurance Capital Standards (K-ICS) ratio, stood at 183% at the end of 2024, a decline of around 26 percentage points compared to year-end 2023. This decline was primarily driven by strengthened capital regulations aimed at preventing the underestimation of underwriting risks and the overestimation of future insurance profits.
Mr. Jo warned that insurers’ regulatory solvency will remain under pressure over the next 12-18 months, considering potential declines in interest rates and continuous regulatory strengthening of the discount rate, which will persist in phases until 2027.
The article highlights the challenges faced by South Korean life insurers in navigating regulatory pressures while maintaining financial stability. The industry’s ability to adapt to these changes will be crucial in determining its future performance.
