Insurance Companies Turning to ESG Bonds... Hanwha Life Also Plans to Issue $1 Billion (Comprehensive)

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 proactive response ahead of the introduction of new capital regulations, aiming both to increase capital and contribute to realizing 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 KRW 880 billion to 1.18 trillion.

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).

Recently, bond valuation losses occurred due to rising interest rates, and concerns have been raised that the RBC ratio may decline further if the upward trend in interest rates 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.

As ESG has emerged as a key management issue, insurance companies have been actively issuing ESG bonds recently. Earlier, Kyobo Life Insurance successfully issued KRW 470 billion worth of ESG-certified hybrid capital securities in September. The capital raised will be used to gradually expand investments in eco-friendly sectors such as renewable energy.

Mirae Asset Life Insurance also issued KRW 300 billion worth of ESG subordinated bonds in April and is strengthening ESG management.

ESG bonds include social bonds issued for social roles such as supporting small and medium-sized enterprises, job creation, and vulnerable groups; green bonds used for green industries such as eco-friendly and renewable energy; and sustainable bonds that combine both. Funds raised through ESG bonds must be used exclusively for ESG-related sectors.

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