Financial Services Commission Suspends New Business for MG Non-Life Insurance
Bridge Insurer to Be Established for Contract Transfer and Corporate Liquidation
Focus on Minimizing Losses for Existing Policyholders
MG Non-Life Insurance, which was designated as a troubled financial institution and subsequently failed to find a buyer, is now effectively entering the liquidation process. Existing insurance contracts will be transferred to the five major non-life insurance companies without any changes to their terms, in order to minimize losses for policyholders.
On May 14, the Financial Services Commission announced at a regular meeting held at the Government Complex Seoul that it had imposed a partial business suspension on MG Non-Life Insurance (hereafter MG Non-Life), prohibiting the company from entering into new insurance contracts and similar activities.
The scope of the business suspension includes the signing of new insurance contracts (excluding re-enrollment and automatic renewal contracts), as well as changes to the terms of existing insurance contracts (limited to increases in coverage amount, changes in insurance type, extension of insurance period, and addition of coverage). The suspension period will last for six months, until November 14, 2025.
Although new business operations have been suspended, MG Non-Life will continue to perform tasks necessary for maintaining and managing existing insurance contracts?such as collecting premiums and paying out insurance claims?just as before. The status of current MG Non-Life policyholders will remain unchanged.
MG Non-Life was first issued a management improvement recommendation in 2018, and between then and 2022, it received further recommendations, demands, and orders to improve management, but failed to comply. As a result, it was designated as a troubled financial institution in April 2022. After several failed public sales attempts, the company is now effectively entering liquidation procedures.
The government and related agencies reportedly agreed that delaying the resolution of MG Non-Life, which is already in a state of negative net assets, would only lead to an accumulation of insolvency, increased anxiety among policyholders, and higher resolution costs.
The resolution of MG Non-Life will be carried out by transferring its insurance contracts to five major non-life insurance companies?DB Insurance, Meritz Fire & Marine Insurance, Samsung Fire & Marine Insurance, KB Insurance, and Hyundai Marine & Fire Insurance. However, since it will take time to prepare for the contract transfers, the Korea Deposit Insurance Corporation will establish a bridge insurer, and contracts will be temporarily transferred to this bridge insurer for management until the transfer preparations are complete.
As of the end of March, MG Non-Life held approximately 1.51 million insurance contracts, about 90% of which are long-term products with complex terms, such as disease and accident insurance. Transferring these contracts is expected to require significant time (over one year) and costs, including the development of new IT systems.
The contract transfer process using a bridge insurer involves the Korea Deposit Insurance Corporation establishing the bridge insurer, transferring MG Non-Life’s insurance contracts to the bridge insurer (MG Non-Life → bridge insurer), and having the bridge insurer maintain and manage the contracts while the final acquiring non-life insurers prepare their IT systems and other infrastructure. Once preparations are complete, the contracts will be finally transferred (bridge insurer → major non-life insurers). After the contracts have been moved to the bridge insurer, the liquidation process for the MG Non-Life corporate entity will proceed.
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