Korean Insurers’ profitability to remain sound despite capitalisation pressure

Written by Michael Griffiths

24/06/2025

Amortisation of Korean insurers’ contractual service margin (CSM) will be a “key contributor” to their earnings stability, Fitch Ratings has stated.

Capitalisation will remain under pressure from falling interest rates and regulatory tightening, however, according to the credit rating agency.

Fitch said it expects the Korean insurance sector’s credit fundamentals to remain sound in 2025, as a steady generation of new business CSM will continue to support their capitalisation.

The sector’s average Korean Insurance Capital Standard ratio declined to 197.9% in Q1 this year, from 206.7% in 2024, following regulatory changes such as liability discount rate cuts and actuarial adjustments. Fitch is not expecting further actuarial assumption adjustments in H2 this year, which could ease financial pressure on insurers.

“Insurers’ capital positions are supported by growth in new business CSM and capital management, including supplementary capital issuance and reinsurance,” Fitch said.

“Profitability continues to be moderate so far in 2025, driven by stable insurance profits and sound investment returns, even as market volatility poses risks.

“Insurers remains active in asset-liability management, as they seek to narrow duration gaps and increase allocation to domestic long-term bonds. Overseas investments remain well-hedged, minimising currency risks.”

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