Insurance Companies Turning to ESG Bonds... Hanwha Life Also Issues $1 Billion

Mirae Asset, Kyobo Life, and Others Issue Bonds in Succession
Contributing to Capital Expansion and Social Value Realization

[Asia Economy Reporter Oh Hyung-gil] Hanwha Life Insurance is set to issue ESG (Environmental, Social, and Governance) bonds worth up to $1 billion in the overseas financial market.

This year, Mirae Asset Life Insurance and Kyobo Life Insurance have also successfully issued ESG bonds, drawing attention to 'green capital procurement.' This is interpreted as a preemptive response to the introduction of new capital regulations, aiming not only to expand capital but also to contribute to the realization of corporate social value.

According to the insurance industry on the 7th, Hanwha Life recently held a board meeting and decided to issue overseas ESG subordinated bonds. The issuance size is expected to be between $750 million and up to $1 billion, equivalent to approximately 880 billion to 1.18 trillion KRW.

A Hanwha Life official explained, "We decided to issue ESG bonds to respond to capital regulations such as the new solvency regime (K-ICS) scheduled to be introduced in 2023," adding, "Specific issuance size, timing, and interest rate conditions have not yet been determined."

Hanwha Life maintains a stable credit rating. In February, it received an AAA insurance financial strength rating for the 14th consecutive year from the three major credit rating agencies, and its insurance financial strength rating was upgraded from 'A (Negative)' last year to 'A (Stable)' this year by the global credit rating agency Fitch.

If the bond issuance succeeds as planned, Hanwha Life is expected to significantly offset the lowered Risk-Based Capital (RBC) ratio. As of the third quarter, Hanwha Life's RBC ratio stood at 193.5%, down 8.5 percentage points from the previous quarter. Although it remains above the financial authorities' recommended level (150%), it is lower than the life insurance industry average (272.9% as of the second quarter).

Due to recent interest rate hikes, bond valuation losses have occurred, and concerns have been raised that the RBC ratio may decline further if the upward interest rate trend continues. Hanwha Life also stated at a recent investor presentation that "maintaining the RBC ratio at a minimum level of 170% is the primary goal."

Hanwha Life plans to accelerate ESG management by issuing ESG bonds. Generally, ESG bonds include social bonds issued for social roles such as supporting small and medium-sized enterprises, job creation, and assistance to vulnerable groups; green bonds used for environmentally friendly and renewable energy-related purposes; and sustainable bonds that combine both.

As ESG has emerged as a key management issue, insurance companies have been actively issuing ESG bonds recently. Earlier, Kyobo Life Insurance successfully issued ESG-certified hybrid capital securities worth 470 billion KRW in September. Mirae Asset Life Insurance also issued ESG subordinated bonds worth 300 billion KRW in April.

An insurance industry official said, "Funds secured through ESG bond issuance can contribute to sustainable growth by increasing investments in eco-friendly sectors such as renewable energy," adding, "Since it ensures corporate social responsibility along with capital expansion, issuance is expected to increase going forward."