Even Insurers Stir... Group Loans Increase 1.5 Times in 9 Months

As the comprehensive tightening of loans in the primary financial sector intensifies, group loans, once exclusive to banks, have noticeably increased in insurance companies as well. With the financial authorities' stringent loan regulations limiting the lending capacity of banks, secondary financial institutions, including insurance companies, are expanding their influence in the group loan market. Given that the financial authorities are already monitoring Saemaeul Geumgo, where the rise in group loans is prominent, through ongoing secondary financial household debt inspection meetings, there are concerns that insurance companies also need to be closely watched.

According to the Financial Supervisory Service's "Insurance Sector Group Loan Balance Status" data obtained by Asia Economy on the 24th through Kim Byung-gi, a member of the National Assembly's Political Affairs Committee (Democratic Party), the balance of group loans in the insurance sector stood at 330 billion KRW as of the end of September this year, a 50% increase compared to 220 billion KRW at the end of last year. Considering that this year is not yet over, this is an unusual growth rate.

Group loans are loans collectively granted without individual screening to prospective owners of newly supplied apartments or apartments undergoing reconstruction. They are divided into interim payment loans received at the time of sale, balance payment loans applied for upon move-in, and relocation loans supporting members' moving expenses during the reconstruction project period. Unlike general mortgage loans where existing buildings are immediately used as collateral, group loans use apartments under construction as collateral but set the collateral after completion. In particular, interim payment loans are disbursed without actual collateral until completion, posing greater risk.

Group loans are typically products handled mainly by commercial banks, which offer lower interest rates than secondary financial institutions, but recently, as household loan management in banks has tightened, demand seems to be shifting to secondary financial institutions. The lending market landscape is changing, with mutual finance institutions entering balance payment loans for large-scale reconstruction complexes in Seoul, which were once considered exclusive to banks. A recent example is the Dunchon Jugong reconstruction complex in Seoul selecting Seoul Gangdong Nonghyup as the institution handling group loans, an unprecedented case.

As Saemaeul Geumgo, a mutual finance institution, shows signs of expanding operations centered on group loans, financial authorities have recently moved to curb the 'balloon effect' in the secondary financial sector. However, a financial authority official explained, "While banks dominate the group loan market, some demand is also being taken by non-bank sectors, so there is a difference in sales capabilities, and in terms of scale, insurance companies are not at a level of concern."

The balance of group loans in the insurance sector recorded 740 billion KRW and 720 billion KRW in 2021 and 2022, respectively, before sharply dropping to 220 billion KRW last year. Since then, it has shown a steep increase this year, raising concerns. Assemblyman Kim Byung-gi pointed out, "In the past, the increase in loans was natural as the real estate market was active and the timing coincided with the execution of interim and balance payment loans for previously supplied units. Now, it appears that demand is inevitably shifting to insurance companies to avoid bank regulations. Insurance companies' main business is insurance sales, not lending, and they have significantly fewer loan screening personnel and systems compared to banks, so the movement of loan demand is risky."