Down 8.7 Percentage Points from Previous Quarter
Life Insurers at 190.7%, Non-life Insurers at 207.6%
Available Capital Increased by 1.3 Trillion Won in Q1
In the first quarter of this year, the ability of insurance companies to pay out insurance claims worsened compared to the previous quarter. The financial supervisory authorities announced that they plan to thoroughly monitor risk management, especially focusing on insurance companies with insufficient asset-liability management (ALM).
According to the "Status of Insurance Companies' Solvency Ratios (K-ICS)" as of the end of March 2025, released by the Financial Supervisory Service on June 17, the K-ICS ratio for insurance companies applying transitional measures was 197.9%, down by 8.7 percentage points from the previous quarter. The K-ICS ratio for life insurers was 190.7%, a decrease of 12.7 percentage points from the previous quarter, while for non-life insurers, it fell by 3.4 percentage points to 207.6%.
The K-ICS ratio is a capital adequacy indicator that reflects an insurance company's ability to pay insurance claims. It is calculated by dividing available capital by required capital. Available capital refers to the amount of capital held by the insurer, including paid-in capital and retained earnings. Required capital is the amount of capital an insurer must maintain to pay insurance claims to policyholders.
The Financial Supervisory Service recommends that insurance companies maintain a K-ICS ratio of at least 130%. If the K-ICS ratio falls below 100%, prompt corrective actions such as management improvement recommendations, requirements, or orders may be imposed.
The decline in the K-ICS ratio for insurance companies was due to the increase in required capital outpacing the increase in available capital. As of the end of March, available capital under K-ICS stood at 249.3 trillion won, an increase of only 0.48% (1.3 trillion won) from the previous quarter. During the same period, required capital rose by 4.92% (5.9 trillion won) to 126 trillion won.
Available capital saw a slight increase due to the realization of net profit and new issuance of capital securities by insurance companies, despite falling interest rates and the adjustment of discount rates.
Required capital increased more than available capital, as the amount of risk for disability and illness grew by 3 trillion won due to the sale of long-term protection-type insurance, and interest rate risk rose by 1.7 trillion won due to the expansion of ALM mismatches.
Looking at the changes in the K-ICS ratio by sector, among life insurers, ABL Life saw the largest increase, rising by 14.3 percentage points to 168% compared to the previous quarter. In contrast, Kyobo Life experienced the largest decrease, dropping by 33.9 percentage points to 186.8% during the same period.
Among non-life insurers, Shinhan EZ recorded the largest increase in the K-ICS ratio, rising by 181.2 percentage points to 340.4%. On the other hand, the largest decrease was seen at the US-based Star Insurance, which fell by 1,631.8 percentage points to 4,549.8%.
A Financial Supervisory Service official stated, "With the recent base rate cuts, the low interest rate trend is expected to continue, making ongoing efforts in ALM management necessary. It is important to not only extend asset duration but also to shorten liability duration."
The official added, "We plan to thoroughly supervise risk management, especially for insurance companies with insufficient ALM management, to strengthen overall risk controls."
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