Hanwha Life and Hyundai Marine & Fire Insurance Selected for First Regular Inspections
"Protecting Consumers from Discontinued Marketing"
"Swift Progress on Samsung Life and Fire & Marine Subsidiary Integration"
No Comment on Whether Woori Financial Group's Management Evaluation Will Conclude in February
Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), said on the 27th, "We will discuss with the Financial Services Commission measures to improve the quality of insurance companies' capital and ways to reduce interest burdens, such as issuing reasonable subordinated bonds."
Lee Bok-hyun, Governor of the Financial Supervisory Service (right), is having a conversation with Lee Young-jong, CEO of Shinhan Life Insurance, during a meeting on the 27th. Photo by Moon Chae-seok
Governor Lee made these remarks during a meeting with reporters immediately after holding a CEO roundtable for insurance companies at the Life Insurance Education and Culture Center in Gwanghwamun, Jongno-gu, Seoul.
He urged CEOs to focus on managing financial soundness. He stated, "Due to increased uncertainty in the financial market and declining interest rates, downward pressure on the soundness of insurance companies may increase. It is necessary to manage risks at an appropriate level through financial impact analysis and to improve the quality of capital by expanding core capital."
He added that the supervisory authorities will also promote institutional support, such as revising capital regulations, to ensure that insurance companies manage capital adequacy rationally.
Governor Lee said, "Insurance companies have issued subordinated bonds and other supplementary capital to improve the Solvency Capital Requirement (KICS), which has led to a deterioration in the quality of capital. This year, we plan to discuss with the Financial Services Commission and the insurance industry measures to improve the quality of capital and reduce interest burdens through reasonable supplementary capital issuance."
He emphasized that insurance companies should strengthen internal controls and restore consumer trust. He diagnosed that short-term performance-oriented practices are spreading, such as neglecting unhealthy sales practices in sales channels like General Agencies (GA).
He urged, "Please make efforts to strengthen internal controls and foster an organizational culture focused on long-term performance, taking this opportunity to implement best practices in accountability structures and executive compensation systems."
Regarding the designation of Hanwha Life and Hyundai Marine & Fire Insurance as the first companies subject to regular inspections this year, he said, "The policy is to prevent consumer damage caused by discontinued marketing."
He added, "We will inspect not only insurance companies but also sales channels such as General Agencies (GA) regarding recent management of regular insurance. If necessary, we will examine contractual issues in the sales process."
He further stated, "The basic direction is not simply to hold insurance companies or agents accountable, but to hold responsible those structurally neglected issues in the insurance sales process."
Regarding the approval of Samsung Life Insurance's acquisition of Samsung Fire & Marine Insurance as a subsidiary, he said the procedure will be expedited.
Governor Lee explained, "Samsung Life Insurance's acquisition of Samsung Fire & Marine Insurance as a subsidiary is merely to resolve contradictions in current laws regarding the mechanically increased shares during the process of canceling treasury shares acquired from a value-up perspective. Since the acquisition does not exceed 20% under the equity method, there is no accounting effect, and the review only examines financial requirements under laws such as KICS and asset management ratios, so it will proceed swiftly."
Regarding Lotte Insurance, which chose the 'exception model' in last year's year-end settlement, he said, "An audit is currently underway by an accounting firm. Regarding the principle and exception models, rather than having a mechanical inspection direction, we will communicate and make judgments about the rationality of the exception provisions."
On the controversy over 'riders that do not cover death,' he said, "We are currently conducting a status check, but depending on whether there is a death agreement according to past design structures, it may appear differently. Since no-lapse and low-lapse insurance have been introduced and various riders are included from the consumer choice perspective, there is room to reduce costs. Therefore, rather than a punitive perspective, we are observing how they operate."
The FSS is conducting a status check on the non-payment of policyholder reserves for 'riders that do not cover death' targeting major life insurers. A 'rider that does not cover death' is a product that does not pay a death benefit upon death but pays a diagnosis benefit if the insured is diagnosed with a disease covered under the policy.
Governor Lee refrained from commenting on whether the management evaluation related to Woori Financial Group's acquisition of Dongyang Life Insurance and ABL Life Insurance can be completed by the end of this month, saying, "I will speak on this at another opportunity."
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