New standard continues to pressure South Korean insurers’ capital management

Written by Adam Cadle

21/02/2024

The implementation of a more stringent risk measurement under the Korean-Insurance Capital Standards (K-ICS) a year ago has led to a decline in the average solvency ratio for South Korea’s insurance industry, according to AM Best.

The enactment of K-ICS in South Korea, which began in January 2023 alongside the adoption of IFRS 17 accounting standards, will likely remain a major factor affecting the capital and business strategies of the country’s insurers. The new standards replace South Korea’s previous risk-based capital (RBC) regime with a more accurate and comprehensive risk management approach to better align it with global best practices and standards.

The pressure on insurers’ solvency ratio could be worse for insurers with relatively weak asset liability management. However, the currently elevated level of market interest rates, coupled with insurers’ continued efforts to improve asset liability management in recent years, “could partly mitigate the solvency pressure under the new regime”, AM Best said.

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