Procedures for Overseas Subsidiary Ownership by Insurance Companies to Be Simplified

Legislative Notice of the Amendment to the Enforcement Decree of the Insurance Business Act

Going forward, when insurance companies own overseas subsidiaries for overseas expansion, related procedures will be simplified. Tasks such as healthcare, insurance contract, and loan consultation of overseas subsidiaries, which previously required approval from authorities and involved complex procedures, will also be replaced by a prior notification process.

The Financial Services Commission (FSC) announced on the 13th that it will conduct a legislative notice on the amendment of the Enforcement Decree of the Insurance Business Act containing these details. This is a follow-up measure to the "Regulatory Improvement Plan to Activate Overseas Expansion of Financial Companies" announced in July.

Under the current system, when an insurance company owns an overseas subsidiary, it must obtain approval from the FSC or submit a prior notification depending on the nature of the subsidiary's business. Insurance business, actuarial work, loss adjustment work, insurance agency work, insurance research work, investment advisory business, discretionary investment business, collective investment business, and real estate business are subject to prior notification, while all other overseas businesses require FSC approval.

On the 9th, officials were busy moving in the corridor of the Financial Services Commission at the Government Seoul Office in Jongno-gu, Seoul, where financial authorities decided to include mortgage loans (Judaemdae) in the 'debt refinancing' infrastructure scheduled to launch in May by the end of the year. Financial authorities explained that they aim to reduce the interest burden on mortgage loans by establishing a debt refinancing platform that allows users to compare financial sector loan interest rates at a glance and switch loans easily. Photo by Yoon Dong-joo doso7@

At a meeting held in April to promote the overseas expansion of insurance companies, one of the suggestions raised was the need to simplify procedures when owning overseas subsidiaries. It was pointed out that the process related to FSC approval is complicated and uncertain, causing difficulties in investment decisions.

Accordingly, the authorities decided to expand the scope of prior notification through this amendment. First, for businesses that currently require prior notification when insurance companies own domestic subsidiaries, the procedure will be simplified to allow prior notification when owning subsidiaries overseas as well.

In Korea, businesses closely related to the management of insurance, such as healthcare, insurance contract and loan consultation, and operation of elderly welfare facilities, are subject to prior notification. Going forward, the procedure will be simplified to prior notification when owning subsidiaries overseas for businesses closely related to insurance management.

Additionally, the procedure will be simplified to prior notification when owning insurance brokerage businesses and offshore financial companies as subsidiaries overseas. Insurance brokerage is an independent business mediating the conclusion of insurance contracts and is closely related to insurance business; therefore, it will be included as a notification target along with actuarial work and insurance agency work, which are already operated under prior notification. Regarding offshore financial companies, considering that financial companies currently submit prior notifications when investing in offshore financial companies under the "Regulations on Overseas Expansion of Financial Companies," the plan is to change this to a prior notification target.

The authorities expect that once the Enforcement Decree is amended, procedures will be simplified and related uncertainties reduced when insurance companies attempt to expand overseas through subsidiary ownership, thereby activating overseas expansion.

In addition, when the Korea Insurance Development Institute calculates reference net insurance rates and reports them to the FSC (entrusted to the Financial Supervisory Service) under the Insurance Business Act, a legal basis will be established allowing the Financial Supervisory Service to process sensitive information (resident registration numbers) necessary for verifying mortality basic statistics to examine the appropriateness of the rates.

Also, starting in 2024, when credit card companies sell insurance products, the sales proportion per insurance company must be maintained at 25% or less. However, if it is clear that compliance with the regulatory ratio is impossible because four or fewer insurance companies provide insurance products sold by a single credit card company, the sales proportion per insurance company will be allowed up to 50%.