Approved at FSC Regular Meeting on the 5th
Lotte Insurance Required to Implement Management Improvement Plan
Insurance Operations to Continue as Normal
The Financial Services Commission has issued a "Management Improvement Recommendation" to Lotte Insurance.
On November 5, the Financial Services Commission held a regular meeting and imposed a Management Improvement Recommendation on Lotte Insurance, which is the lowest level of prompt corrective action. Prompt corrective action is an administrative measure by which financial authorities require financial institutions with deteriorating soundness to improve their management.
Previously, the Financial Supervisory Service conducted a management status evaluation of Lotte Insurance. As a result, Lotte Insurance received an overall grade of 3 and a grade of 4 in capital adequacy, making it subject to the Management Improvement Recommendation under prompt corrective action. An official from the Financial Services Commission explained, "It was not sufficiently confirmed that the grounds for prompt corrective action could be resolved in a short period of time," and added, "At the end of 2020, Lotte Insurance received an overall grade of 4 in the management status evaluation and was granted a one-time deferral of the prompt corrective action management improvement request in September 2021."
Under this Management Improvement Recommendation, Lotte Insurance must prepare a management improvement plan within the next two months to enhance capital adequacy, including asset disposal, cost reduction, and organizational operation improvements. After submitting this plan to the Financial Supervisory Service and receiving approval from the Financial Services Commission, the company will implement the improvement measures over the following year.
The Financial Services Commission stated that this measure is intended to promote sustainable management over the medium and long term and serves as a preemptive measure to strengthen capital soundness management of insurance companies. By faithfully implementing the management improvement plan, Lotte Insurance can resolve the grounds for prompt corrective action, in which case the Management Improvement Recommendation will be lifted. The Financial Services Commission plans to closely monitor Lotte Insurance's liquidity and other indicators going forward.
An official from the Financial Services Commission stated, "During the period of implementing the Management Improvement Recommendation, Lotte Insurance's business operations, including premium payments, insurance claims and payouts, and new contract signings, will proceed as normal," adding, "The risk-based capital ratio will also remain above 100%, so policyholders can use insurance services with confidence."
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