3Q Insurance Companies' Household Loans Increase by 800 Billion KRW... Balloon Effect in Secondary Financial Sector

Insurance Company Loan Receivables Balance 266.9 Trillion KRW
Up 500 Billion KRW QoQ
Non-Performing Loan Ratio 0.71%

The outstanding balance of household loans by insurance companies in the third quarter increased by 800 billion KRW compared to the previous quarter. This is interpreted as a 'balloon effect' in the secondary financial sector, including insurance companies, due to the financial authorities tightening bank loans.

According to the "Status of Insurance Company Loan Claims as of the End of September" announced by the Financial Supervisory Service on the 22nd, the outstanding balance of insurance company loan claims was 266.9 trillion KRW, an increase of 500 billion KRW from the previous quarter. During the same period, corporate loans decreased by 300 billion KRW to 132.4 trillion KRW, but household loans increased by 800 billion KRW to 134.4 trillion KRW. Among household loans, insurance policy loans increased by 500 billion KRW, and mortgage loans also rose by 400 billion KRW. Other loans decreased by 100 billion KRW.

Household loans by insurance companies declined consecutively in the first and second quarters of this year but reversed to an increase in the third quarter. This appears to be due to loan demand shifting to the secondary financial sector, specifically the insurance industry, as commercial banks raised the threshold for mortgage loans (jumdae) to manage household debt and slow down loan growth. Insurance companies have also recently started adjusting loans by limiting mortgage loan volumes or suspending new loans.

The delinquency rate on insurance company loan claims in the third quarter was 0.62%, up 0.07 percentage points from the previous quarter. During the same period, the delinquency rate on household loans rose by 0.06 percentage points to 0.68%, and the delinquency rate on corporate loans increased by 0.08 percentage points to 0.59%.

The non-performing loan ratio of insurance companies was 0.71%, down 0.04 percentage points from the previous quarter. During this period, the non-performing loan ratio for household loans rose by 0.08 percentage points to 0.49%, while that for corporate loans fell by 0.1 percentage points to 0.81%.

A Financial Supervisory Service official stated, "We will continuously monitor the soundness indicators of insurance company loans, such as delinquency rates, and promote early normalization of non-performing assets by enhancing loss absorption capacity through sufficient provisioning for loan losses."