Lotte Insurance to Submit Management Improvement Plan by January 2
Implementation of Improvement Procedures for One Year Upon FSC Approval
Main Lawsuit to Proceed Separately... Legitimacy Dispute Continues
The court has dismissed Lotte Insurance's request for an injunction to suspend the effectiveness of the prompt corrective action imposed by financial authorities. Lotte Insurance is expected to implement financial improvement measures while continuing to challenge the legality of the prompt corrective action through a main lawsuit.
According to the financial and legal sectors on December 31, the 14th Division of the Seoul Administrative Court dismissed Lotte Insurance’s injunction request earlier in the day. As a result, Lotte Insurance must submit a management improvement plan to the financial authorities by January 2. The plan must include cost reductions, disposal of non-performing assets, and improvements in workforce and organizational management. If the Financial Services Commission approves the plan, Lotte Insurance will carry out improvement procedures according to the plan over the next year.
Previously, on November 5, the Financial Services Commission issued a “management improvement recommendation,” the lowest level of prompt corrective action, citing Lotte Insurance’s weak capital adequacy. This measure followed the Financial Supervisory Service’s management status evaluation (RAAS) in May, which gave Lotte Insurance an overall grade of 3 (average) and a capital adequacy grade of 4 (weak).
Lotte Insurance maintains that the authorities' actions are unfair. The company argues that receiving a grade 4 in capital adequacy was due to the authorities placing greater weight on non-quantitative evaluations. Regarding the deferral of the introduction of the Own Risk and Solvency Assessment (ORSA) system, which was flagged as an issue in the non-quantitative evaluation, Lotte Insurance explained that the decision was made through a legitimate board resolution in accordance with the Enforcement Rules of the Insurance Business Supervision Regulations. The company claims that imposing sanctions based on the internal management status evaluation manual, which is a lower-level regulation, for a lawful ORSA deferral decision based on higher-level laws, raises legal concerns. On December 11, Lotte Insurance filed for an injunction to suspend the effectiveness of the action and initiated the main lawsuit. The labor union also staged protest rallies.
This dismissal of the injunction is expected to pose a significant challenge to the sale of Lotte Insurance. Potential buyers may further lower their bids, citing the management improvement recommendation as a reason. Regardless of the injunction result, Lotte Insurance plans to continue with the main lawsuit. A Lotte Insurance representative stated, "We will faithfully comply with the remaining legal procedures."
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