Life Insurance Association Holds New Year's Press Conference on the 12th
Chairman Kim Cheolju: "Difficulties in Managing Life Insurers' Soundness Intensify"
"Proposals for IFRS 17 Improvements to Meet Global Standards"
The life insurance industry is pushing for institutional improvements to address various accounting-related issues arising under the International Financial Reporting Standards (IFRS 17) framework. Targets include the insurers' solvency ratio (K-ICS, K-ICS) which has been steadily declining recently, as well as surrender value reserves and insurance liability discount rates.
At a New Year's press conference held on the 12th, Kim Cheol-ju, chairman of the Life Insurance Association, said, "Although the life insurance industry is making continuous efforts to increase capital, such as issuing capital securities, difficulties in managing soundness, including the decline of K-ICS, are intensifying. We will thoroughly investigate global soundness regulations and support the smooth landing of soundness systems through recommendations to supervisory authorities."
Kim Cheol-ju, Chairman of the Life Insurance Association, is speaking at the New Year's press conference held on the 12th.
Regarding improvements to K-ICS, plans are underway to allow mid-term applications for some transitional measures, such as interest rate risk amounts. This is to mitigate temporary shocks caused by changes in the external environment. Transitional measures refer to steps that gradually apply new risk amount measurements until K-ICS reaches a stable level, considering the rapid changes in accounting situations due to the introduction of K-ICS.
Concerning surrender value reserves, which have increased uncertainty around insurers' dividend capacity, plans will be made to ensure they do not conflict with government value-up (corporate value enhancement) policies. Surrender value reserves are funds that insurers set aside in advance to refund customers when they cancel insurance contracts. Recently, controversy arose over insurers excessively accumulating these funds, reducing dividend capacity and tax revenue. Chairman Kim stated, "Since the launch of the IFRS 17 system in 2023, the surrender value reserves introduced have excessively increased due to new contracts, and the number of companies required to accumulate them is expected to continue rising. Accordingly, there is concern that the reduction in life insurers' dividend capacity and tax issues will persist, so reasonable institutional improvements are necessary."
Regarding insurance liability discount rates, plans are to refer to advanced overseas cases and propose application methods suitable for domestic conditions to financial authorities.
On this day, the Life Insurance Association selected three core goals and nine key tasks to actively pursue this year, including improvements related to IFRS 17. The three core goals are ▲supporting stable management of life insurers in response to changes in the financial environment ▲enhancing consumer trust through consumer-friendly institutional improvements ▲strengthening the role of life insurance in a super-aged society and discovering new growth engines.
The Life Insurance Association plans to increase consumer trust through consumer-friendly institutional improvements. To improve consumer accessibility to insurance claim trust rights, regulations related to trust targets, beneficiary scope, and solicitation qualifications will be improved. Legal revisions and practical standards will also be prepared to ensure the sales commission reform plan, developed through discussions at the Insurance Reform Council, is established in the market.
Support will be provided for the development of pension products suitable for the super-aged era, expansion of tax benefits for long-term receipt, and securitization of death benefits. Efforts will be made to ease regulations on insurers' nursing care and senior housing businesses, and systematic support will be provided for elderly care services, including the provision of insurance and nursing care convergence services.
Through expanded exchanges with overseas supervisory authorities and related organizations, active support will be provided for life insurers' overseas expansion. Chairman Kim said, "Overcoming difficult domestic and international situations requires clear situational awareness and bold execution. If we approach this with the attitude of 'Saseok Wiho' (射石爲虎, 'shooting a stone to scare a tiger'), the challenging environment surrounding the life insurance industry will act as an opportunity for new growth."
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