Insurance Companies' RBC Ratio Declines for Second Consecutive Quarter... Down 19%p as of End of March

RBC Ratio as of the End of March is 256.0%

[Asia Economy Reporter Park Sun-mi] The financial soundness of insurance companies continues to deteriorate.

According to the status of insurance companies' Risk-Based Capital (RBC) ratios announced by the Financial Supervisory Service on the 14th, the RBC ratio as of the end of March was 256.0%, down 19.0 percentage points from 275.0% at the end of last year. It has been declining for two consecutive quarters since recording 283.6% at the end of September last year. This is the lowest figure since June 2018, when it was 253.2%.

The RBC ratio is the value obtained by dividing 'available capital,' which is the amount of capital that can cover losses from various risks, by 'required capital,' which is the amount of loss if various risks materialize. The RBC ratio is an indicator used to measure the financial soundness of insurance companies, and the Insurance Business Act requires it to be maintained at 100% or higher.

Insurance companies' available capital decreased by 1.11 trillion KRW due to factors such as a decrease in other comprehensive income (accumulated valuation gains on available-for-sale securities) caused by rising interest rates (-1.16 trillion KRW). On the other hand, required capital increased by a total of 400 billion KRW due to an increase in insurance risk amount from increased premiums (400 billion KRW) and an increase in credit risk amount due to increased alternative investments and loans (200 billion KRW).

The RBC ratios for life insurance and non-life insurance companies were 273.2% and 224.8%, respectively, down 24.1 percentage points and 9.2 percentage points compared to the end of last year. Among life insurers, KB recorded the lowest at 153.7%, and among non-life insurers, MG recorded the lowest at 108.8%.

A Financial Supervisory Service official stated, "As of the end of March, the RBC ratio of insurance companies is 256.0%, which greatly exceeds the 100% standard for fulfilling insurance payment obligations, but it has been continuously declining since the end of September last year. We plan to strengthen monitoring of domestic and international interest rate fluctuations and the impact of COVID-19, and if there are concerns about RBC ratio vulnerabilities, we will supervise to enhance financial soundness through proactive capital expansion inducement."