Up 8.9 Percentage Points from Previous Quarter
Life Insurers at 200.9%, Non-life Insurers at 214.7%
Available Capital Increased by 11.3 Trillion Won at End of First Half
At the end of the first half of the year, insurance companies’ ability to pay claims showed some improvement from the record low recorded in the previous quarter. Financial supervisory authorities announced plans to strengthen supervision of asset-liability management (ALM) risks in anticipation of possible interest rate cuts in the near future.
According to the Financial Supervisory Service’s announcement on September 18 regarding the status of insurance companies’ capital adequacy ratios (K-ICS) as of the end of June 2025, the average K-ICS ratio of insurers applying transitional measures stood at 206.8%, up 8.9 percentage points from the end of the first quarter. The first quarter of this year marked the first time the K-ICS ratio fell below 200% since the adoption of the new international accounting standard (IFRS 17) in 2023, but the ratio rebounded slightly in the second quarter.
The K-ICS ratio is a capital soundness indicator that shows an insurance company’s ability to pay claims, calculated by dividing available capital by required capital. Available capital refers to the actual capital held by the insurer, such as paid-in capital and retained earnings, while required capital is the minimum capital necessary to pay policyholder claims.
The Financial Supervisory Service recommends that insurers maintain a K-ICS ratio of at least 130%. If the ratio falls below 100%, prompt corrective actions such as management improvement recommendations, requirements, or orders may be imposed.
This rebound was due to the increase in available capital outpacing the increase in required capital. As of the end of June, available capital was 260.6 trillion won, up 4.5% (11.3 trillion won) from the previous quarter. During the same period, required capital stood at 126 trillion won, rising by only 0.05% (600 billion won).
The increase in available capital was attributed to insurers’ solid net profit of approximately 3.9 trillion won in the first half of the year, as well as a 3.4 trillion won increase in other comprehensive income due to rising market interest rates. In addition, the issuance of new capital securities totaling 2.6 trillion won also contributed.
The minimal change in required capital was because the surrender risk amount increased by 2.5 trillion won due to rising market interest rates, but this was offset by a 2 trillion won decrease in interest rate risk amount.
By sector, among the six major life insurance companies (Samsung, Kyobo, Hanwha, Shinhan Life, NH Nonghyup, and KB Life), NH Nonghyup Life recorded the highest ratio at 437.2%. In contrast, Shinhan Life (199.6%), Kyobo Life (199.2%), Samsung Life (186.7%), and Hanwha Life (160.6%) all fell short of 200%. All six companies saw their ratios increase compared to the end of the first quarter.
Among the five major non-life insurance companies (Samsung, DB, Hyundai Marine & Fire, Meritz, and KB), Samsung Fire & Marine had the highest ratio at 274.5%. KB Insurance (191.5%) and Hyundai Marine & Fire (170%) were below 200%, but all five companies saw improved ratios compared to the first quarter.
Given the possibility of a benchmark interest rate cut within the year, the Financial Supervisory Service plans to strengthen ALM supervision for insurers. This is because if interest rates fall, the yield on investment assets may decline while the value of insurance liabilities rises, increasing risk.
An official from the Financial Supervisory Service stated, "Insurers need to manage ALM risks to prevent them from expanding in the event of falling interest rates," adding, "We will thoroughly supervise insurers with insufficient risk management."
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