On July 3, NICE Investors Service analyzed that the life insurance industry continues to face capital adequacy pressures, while regulatory uncertainties remain.
NICE Investors Service evaluated that, within the life insurance industry itself, premium income has increased and profitability has improved under a business strategy focused on protection-type insurance. According to NICE Investors Service, premium income, which stood at 48 trillion won in 2023, rose to 54 trillion won last year.
NICE Investors Service stated, "Premium income increased significantly under a business strategy centered on protection-type insurance," adding, "Total premium income in 2024 has also increased slightly compared to the previous year."
However, the agency analyzed that the industry's overall risk-based capital (RBC) ratio has continued to decline due to the burden of managing capital adequacy. The average RBC ratio, which was 195% in 2023, decreased to 172% in the third quarter of this year.
NICE Investors Service explained, "Since 2024, as market interest rates have fallen and regulations related to the discount rate for insurance liabilities have been strengthened, the RBC ratio has continued to decline," and added, "While the burden of managing capital adequacy has increased across the industry, the trend in RBC ratios varies depending on each insurer's capital management capabilities."
The agency also emphasized that the burden of managing capital adequacy persists due to the ongoing trend of base rate cuts and the strengthening of regulations. NICE Investors Service stated, "Despite regulatory easing, the introduction of regulations related to core capital, the continued trend of base rate cuts, and the diminishing effect of transitional measures over time suggest that the burden of managing capital adequacy within the insurance industry is expected to persist for the time being," and added, "For some insurers, the high utilization rate of the supplementary capital recognition limit could act as a factor increasing the burden of capital management."
In addition, NICE Investors Service explained that regulatory reforms are also creating uncertainties. The agency stated, "This year, regulatory reforms aimed at stabilizing the system are ongoing, and particularly regarding capital adequacy, both downward and upward pressures exist simultaneously," and added, "It will be necessary to monitor future regulatory changes and the resulting levels of capital adequacy."
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