Lee Bok-hyun, Governor of the Financial Supervisory Service (Photo by Financial Supervisory Service)
[Asia Economy Reporter Changhwan Lee] The new Financial Supervisory Service (FSS) Governor met with CEOs of insurance companies and urged them to manage their capital more thoroughly amid growing concerns about an economic recession.
On the 30th, at the Life Insurance Education and Culture Center in Jongno-gu, Seoul, Lee Bok-hyun, Governor of the FSS, held a meeting with CEOs of major domestic insurance companies and said, "Due to recent concerns about an economic recession and the sharp rise in market interest rates, which are also affecting the capital adequacy of insurance companies, please prepare more thoroughly than ever."
The Governor warned, "Despite improvements to the RBC (Risk-Based Capital) system, if the pace of interest rate hikes continues, there is a possibility that the capital adequacy ratings of insurance companies may decline again."
He added, "Each insurance company should strengthen enterprise-wide capital management and prioritize increasing basic capital through paid-in capital increases when expanding capital. The FSS also plans to strengthen ongoing monitoring of capital adequacy by conducting stress tests based on different interest rate scenarios."
Regarding MG Non-Life Insurance being designated as a financially distressed institution by financial authorities due to a decline in its RBC ratio, but with the court suspending the effect of the decision, Governor Lee said, "The administrative court proceedings are ongoing," without providing further details.
On insurance fraud, he stated, "I understand that insurance fraud has a significant impact on the insurance industry," and added, "I requested the industry to provide opinions on what kind of government response system would be appropriate regarding insurance fraud in the future."
He also expressed concerns about the potential deterioration of investment assets due to the economic downturn.
Governor Lee said, "Due to the global economic recession, the possibility of defaults on real estate project financing (PF) loans and overseas alternative investments may increase. Please strengthen credit supervision related to PF loans and enhance self-assessment of the appropriateness of asset soundness classification related to alternative investments."
He continued, "Insurance companies operate a significant portion of foreign currency assets such as overseas bonds and hedge about 91% of them through foreign exchange derivatives. They need to shift their foreign exchange hedging strategies from short-term to long-term to manage foreign currency liquidity."
He emphasized the importance of doing their best to protect insurance consumers. In particular, he expressed concern over the recent surge in consumer complaints related to medical consultations and non-payment increases in indemnity health insurance.
Governor Lee said, "While enhancing the sustainability of indemnity insurance is important, no harm should come to good consumers who file legitimate insurance claims during this process. Please continue to review urgent issues for consumer protection in the insurance claim review process, such as ensuring fairness in the medical consultation pool."
Given the rising interest rate environment, he also urged efforts to protect vulnerable borrowers. He said, "Please check whether loan interest rates are reasonably calculated considering the debt repayment ability of vulnerable borrowers, and strengthen consumer guidance so that the right to request interest rate reductions, which has been introduced in the insurance sector as well, can be more actively utilized." He added, "The FSS will also actively support the activation of the system through disclosure of the acceptance status of interest rate reduction requests."
When asked about the role the FSS will play as the government’s joint investigation team on voice phishing is launched, he expressed strong determination, saying, "I feel the need to eradicate voice phishing crimes more strongly than anyone else, and I am considering whether there are parts where we can actively provide opinions related to the operation."
Regarding the Supreme Court’s final acquittal of Cho Yong-byeong, Chairman of Shinhan Financial Group, who was prosecuted for improper involvement in the recruitment process of new employees at Shinhan Bank earlier that day, Governor Lee stated that he respects the court’s judgment.
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