AM Best Maintains Stable Outlook For South Korea’s Non-life Insurance Amid Regulatory Pressures

KUALA LUMPUR, June 4 (Bernama) -- The stable outlook on South Korea’s non-life insurance segment has been maintained by AM Best, noting a continued refinement of the country’s domestic solvency standards that have helped strengthen insurers’ capital management.

In a statement, AM Best said additional factors include moderate growth in the long-term and general insurance segments and efforts to improve profitability in the former as well as in investment strategies.

However, the global credit rating agency notes an offsetting factor of slow growth prospects and weakened underwriting profitability in South Korea’s auto insurance segment.

The Best’s Market Segment Report titled “Market Segment Outlook: South Korea Non-Life Insurance” stated that the country’s non-life insurance industry is facing capital pressure with increasing insurance liabilities.

This is following the Financial Supervisory Service’s (FSS) push for more realistic actuarial assumptions and a phased plan to cut discount rates until 2027, which are intended to improve the credibility and comparability of insurers’ financials.

“These ongoing regulatory changes, coupled with a decreasing trend in domestic interest rates, are expected to pose a considerable burden on insurers’ solvency, especially those with relatively weaker capital positions.

“However, AM Best expects these changes will promote economic value-based capital management for insurers to maintain sound capital adequacy across the industry,” said AM Best senior financial analyst, Seokjae Lee.

Over the next 12 months, AM Best expects the industry to experience moderate growth with heightened emphasis on profitability management of long-term insurance following a few years of intensified market competition and with a focus on mitigating increasing solvency pressures.

The report also revealed that the auto insurance segment has experienced a slowdown in its premium growth in recent years, owing to sluggish vehicle registrations and cumulative premium rate cuts to support the consumer economy.

-- BERNAMA