Dongyang Life, Entering Coinsurance Contract and Issuing Subordinated Bonds... "Proactive Capital Management"

On the 8th, Dongyang Life Insurance announced that it has signed a joint reinsurance contract worth 150 billion KRW with a global reinsurance company and issued 300 billion KRW in subordinated bonds as part of proactive capital management in response to interest rate cuts and the new international accounting standard (IFRS17).

Following June, Dongyang Life Insurance additionally signed a joint reinsurance contract worth 150 billion KRW with the global reinsurer RGA (Reinsurance Group of America) on the 30th of last month. The total scale of the joint reinsurance contracts increased to 350 billion KRW. A Dongyang Life Insurance official stated, "This is to actively respond to volatility caused by interest rate cuts," adding, "It is aimed at managing the solvency ratio and interest rate risk."

Unlike traditional reinsurance, which only cedes risk premiums to reinsurers and transfers insurance risk, joint reinsurance cedes not only risk premiums but also savings and additional premiums to reinsurers, thereby transferring interest rate and lapse risks to reinsurers as well. It is one of the insurance liability management tools.

Dongyang Life Insurance issued subordinated bonds worth 300 billion KRW the day before. This is the first issuance of subordinated bonds in five years since 2019. On the 25th of last month, a demand forecast was conducted targeting 150 billion KRW for the subordinated bond issuance, receiving purchase orders worth 220 billion KRW. Through an additional public offering, the issuance was increased to 300 billion KRW and completed.

Lee Moon-gu, CEO of Dongyang Life Insurance, stated, "We are making various efforts for stable capital management, such as signing joint reinsurance contracts, more sophisticated asset-liability management (ALM), and issuing subordinated bonds, to respond to the market situation where the level of capital management required for insurers is becoming increasingly higher."