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Solvency (K-ICS)

Korea Insurance Capital Standard (K-ICS) is Korea’s new capital adequacy regulation which takes effect in January 2023. The K-ICS is to measure the available capital to capital requirement ratios of insurance companies by applying market price valuation to their assets and liabilities.

Transitional measures not applied Transitional measures applied
2024.09 2024.06 2024.03 2024.09 2024.06 2024.03
Available Capital 256.0 257.5 259.5 258.9 260.4 262.2
Required Capital 126.3 257.5 125.6 118.6 119.8 117.2
Capital Adequacy Ratio 202.7% 201.5% 206.6% 218.3% 217.3% 223.6%
  • 2024.09: Available capital under K-ICS came in at KRW258.9 trillion as of end-September 2024, down KRW1.5 trillion from three months ago. In the July-to-September period, retained earnings expanded KRW5.7 trillion and issuance of additional Tier 1 bonds and Tier 2 bonds came in at KRW3.4 trillion. However, accumulated other comprehensive income shrank KRW11.2 trillion because of growing insurance contract liabilities resulting from decreases in stock prices and market interest rates. This mainly contributed to the quarter-on-quarter decrease in available capital of the insurance companies. Also, required capital under K-ICS decreased KRW1.2 trillion to KRW118.6 trillion as of end-September 2024. In particular, disability/morbidity risk increased KRW1.9 trillion and interest rate risk grew KRW0.7 trillion as well. Above all, falling stock prices came to reduce exposure, which resulted in decreasing equity risk by KRW3.9 trillion from three months earlier. This contributed to the quarterly decrease in required capital.
  • 2024.06:Available capital under K-ICS came in at KRW260.4 trillion as of end-June 2024, down KRW1.8 trillion from three months ago. In the April-to-June period, accumulated other comprehensive income shrank KRW11.9 trillion because of growing insurance contract liabilities resulting from decreases in market interest rates. By contrast, adjustment reserves increased KRW4.4 trillion, and net income for Q2 2024 expanded KRW4.5 trillion on quarter. This contributed to the quarterly decrease in available capital. Meanwhile, required capital under K-ICS increased by KRW2.6 trillion to KRW119.8 trillion as of end-June 2024. In particular, life/long-term insurance risk grew KRW1.3 trillion from three months earlier based on expanded sales of insurance plans. Also, market risk quarterly increased KRW1.5 trillion as declining market interest rates led to the expansion of interest rate risk.
  • 2024.03: Available capital under K-ICS came in at KRW262.2 trillion as of end-March 2024, up KRW0.6 trillion from three months ago. In the January-to-March period, accumulated other comprehensive income shrank KRW10.3 trillion because of growing insurance contract liabilities resulting from lower discount rates. By contrast, adjustment reserves expanded KRW6.4 trillion due to inflows of new contracts, and net income for the first quarter of 2024 increased by KRW4.8 trillion. This contributed to the quarterly uptick in available capital. Meanwhile, required capital under K-ICS also increased by KRW4.6 trillion to KRW117.2 trillion at the end of March 2024. In particular, market risk such as stock prices volatility grew KRW1.9 trillion from three months ago. Also, operational risk increased KRW2.4 trillion on quarter.
2023
Transitional measures not applied Transitional measures applied
2023.12 2023.09 2023.06 2023.03 2023.12 2023.09 2023.06 2023.03
Available Capital 259.2 259.4 257.3 244.8 261.6 261.7 259.5 246.9
Required Capital 121.1 128.5 127.5 123.6 112.6 116.8 116.1 112.8
Capital Adequacy Ratio 214.0% 201.8% 201.7% 198.1% 232.2% 224.1% 223.6% 218.9%
  • 2023.12: Available capital under K-ICS came in at KRW261.6 trillion as of year-end 2023, down KRW0.1 trillion from three months earlier. With KRW3.5 trillion in year-end dividend payment, accumulated other comprehensive income decreased by KRW6.4 trillion on quarter as insurance contract liabilities grew. This contributed to the quarterly decrease in available capital of the insurance companies. Required capital under K-ICS also decreased KRW4.1 trillion to KRW112.6 trillion at the end of December 2023. In particular, life/long-term insurance risk decreased KRW13.0 trillion as lapse risk shrank KRW21.5 trillion with an improvement in mass-lapse risk calculation method.
  • 2023.09: Available capital under K-ICS came in at KRW261.7 trillion as of end-September 2023, up KRW2.2 trillion from three months earlier. Insurance contract liabilities shrank amid rising interest rates and new insurance contracts increased in the July-to-September period, which contributed to the growth in available capital from three months earlier. Furthermore, required capital under K-ICS grew KRW0.7 trillion to KRW116.7 trillion at the end of September 2023. In particular, lapse risk expanded by KRW3.6 trillion compared to three months earlier while market risk decreased KRW0.9 trillion. This resulted in increasing life/long-term insurance risk by KRW2.2 trillion.
  • 2023.06: Available capital under K-ICS came in at KRW259.5 trillion as of end-June 2023, up KRW12.6 trillion from three months ago. Accumulated other comprehensive income expanded KRW5.9 trillion in April-to-June period, and the contract service margin (CSM) came to be regarded as available capital. These contributed to the increase in available capital of the insurance companies. Furthermore, required capital under K-ICS grew by KRW3.3 trillion to KRW116.1 trillion at the end of June 2023. In particular, market risk expanded by KRW3.7 trillion from three months ago, which contributed to the growth in required capital.
  • 2023.03: Required capital expanded from KRW67.9 trillion at the end of December 2022 to KRW123.6 trillion at the end of December 2023. Under K-ICS, required capital is calculated based on newly added insurance risks (longevity, expenses, surrender and catastrophe) as well as confident level increases from 99.0% to 99.5%. These changes made required capital expand from three months earlier. Meanwhile, available capital grew KRW2.1 trillion because of a transitional measure on capital decrease while required capital decreased KRW10.8 trillion due to transitional measures on newly added risks. With transitive measures applied, K-ICS ratio rose 20.9%p (compared to K-ICS ratio without transitive measures application).
K-ICS RatioTransitional Measure
RBC v.s. K-ICS
Classification Previous RBC K-ICS
Available Capital Asset Valueation Fair Value, Historical Cost Fair Value
Liability Valueation Historical Cost Fair Value
Required Capital Risk Category Insurance Risk Life/Long-Term Insurance Risk
General P&C Insurance Risk
Interest Rate Risk Market Risk (incl. Interest Rate Risk)
Market Risk
Credit Risk Credit Risk
Operation Risk Operation Risk
Risk Measurement Risk Coefficient Shock Scenario
Confidence Level 99% 99.5%
Solvency Margin Ratio Requirement Solvency Margin Ratio ≥ 100% (= Available Capital / Required Capital)

Life

Company K-ICS RBC
2024.09 2024.06 2024.03 2023.12 2023.09 2023.06 2023.03 2022.12
Samsung 193.5 201.5 212.8 218.8 220.5 223.5 219.5 244
Hanwha 164.1 162.8 173.1 183.8 184.3 180.4 181.2 162.2
Kyobo 170.1 161.2 175.8 193.8 183.2 179.6 156.0 180.6
NH 249.7 217.3 214.0 207.7 167.1 170.6 175.5 147.4
Heungkuk 161.3 156.5 160.4 158.2 112.4 108.6 105.4 152.2
Mirae Asset 193.8 198.0 207.2 211.2 204.4 209.7 218.4 179.6
Shinhan 231.0 235.5 241.4 250.8 209.4 214.3 225.5 267.7
KDB 66.3 58.8 44.5 56.7 60.0 67.5 47.7 162.5
DB 174.0 182.9 197.3 213.9 200.8 202.9 202.4 141.9
KB 272.3 299.2 303.8 329.8 277.0 270.7 285.1 248.4 (Prudential)
130.5 (KB Life)
IBK 113.6 89.9 89.3 80.1 64.3 79.8 68.7 182.8
IM (DGB) 131.0 135.1 154.3 162.3 150.5 150.5 158.5 119.0
Hana 164.1 111.7 106.0 122.2 132.5 121.6 119.7 186.3
Kyobo Life Planet 152.6 187.1 213.1 121.6 182.6 175.4 163.8 261.0
Tongyang 160.3 166.2 174.7 193.4 183.7 162.5 162.2 173.2
MetLife 369.1 358.9 356.3 336.0 282.4 315.3 311.7 188.8
ABL 113.1 104.7 114.3 130.0 109.1 113.2 111.4 198.6
AIA 261.2 269.4 271.6 304.2 234.0 244.5 241.1 290.8
Fubon Hyundai 17.3 10.3 19.0 23.9 5.0 5.6 -0.6(1) 171.2
BNP Paribas Cardif 327.1 273.5 203.8 189.4 205.4 309.7 359.7 499.2
LINA 368.8 342.9 344.1 336.3 317.0 315.9 311.2 286.5
Chubb Life 156.5 168.3 188.9 214.6 200.1 202.6 198.2 121.9
Total 191.2 191.7 200.0 208.7 195.9 196.2 192.6 206.4

(1) Fubon Hyundai Life Insurance’s net assets decrease according to market valuation in a situation where there is a large asset-liability duration gap. Solvency ratio is expected to increase due to paid-in capital increase and issuance of capital securities.

Non-life

Company K-ICS RBC
2024.09 2024.06 2024.03 2023.12 2023.09 2023.06 2023.03 2022.12
Samsung 280.6 278.9 280.1 273.0 263.3 274.3 275.2 285.0
DB 228.8 229.2 229.6 233.1 214.5 219.1 210.5 170.8
Hyundai 170.1 169.7 166.9 173.2 172.1 185.4 178.6 174.6
KB 203.7 202.7 202.4 215.9 194.0 192.6 194.0 171.7
Meritz 257.0 224.8 226.9 242.2 230.8 205.7 202.2 165.7
Hanwha 178.2 171.7 172.8 183.3 190.4 177.5 176.7 153.3
Lotte 128.7 139.1 146.4 174.8 148.9 143.1 137.7 150.8
Heungkuk 162.3 151.3 157.0 158.0 160.7 132.3 132.3 163.3
NH 211.2 223.5 232.3 248.2 226.1 240.1 237.7 210.0
MG 35.9 36.5 42.7 64.0 50.1 62.1 65.0 43.4
Hana 178.0 160.6 129.3 153.1 160.9 163.5 162.4 217.2
Carrot 189.4 206.1 234.9 281.3 172.3 201.2 262.5 505.5
Kakao Pay 667.4 1,171.9 2,179.7 4,777.2 6,455.8 2,155.6 1,354.8 1,957.1
AXA 240.0 237.5 237.2 233.5 245.8 235.0 230.8 234.2
AIG 236.7 252.8 247.7 246.0 280.6 267.1 259.9 404.2
ACE 300.6 305.5 302.6 262.1 304.0 297.0 290.0 371.6
Mitshui Sumitomo 429.7 392.9 340.5 264.8 196.8 182.2 182.6 302.1
Allianz 214.5 207.5 206.1 191.0 184.5 184.2 178.1 323.6
Shinhan EZ 169.9 343.5 401.6 469.4 406.8 654.1 491.5 620.7
First American 179.1 178.3 172.8 168.5 131.6 129.5 131.0 258.4
Korean Re 187.3 186.0 181.2 183.2 187.3 190.3 184.0 180.8
Swiss Re 173.0 189.1 179.4 171.3 168.4 179.5 207.3 198.1
SCOR Re 152.6 148.8 148.2 154.4 137.2 140.5 140.2 183.3
RGA 198.3 200.0 200.2 200.2 200.4 179.7 179.2 345.8
Munich Re 307.5 278.8 253.4 225.2 164.9 146.2 138.5 133.9
General Re 344.3 347.6 350.8 342.8 313.1 291.9 291.8 413.2
Hannover Re 182.0 194.7 191.9 180.9 226.3 201.3 200.8 246.5
Tokio Marine 696.6 559.6 465.0 323.2 315.2 222.8 268.7 291.9
Pacific Life Re 306.7 322.4 177.6 176.2 142.4 147.4 150.0 253.7
Habit Factory 359.7 433.3 437.5 384.7 442.9 498.0 540.5 3,429.6
SGI 444.8 445.4 450.1 437.3 408.8 406.4 413.3 381.9
Total 218.7 215.6 216.1 221.9 210.6 210.0 206.2 205.1
Total 19 companies (12 life and 7 non-life) apply transitional measures.
Solvency II v.s. K-ICS
Classification Solvency II K-ICS
Available Capital Recognition period for previously issued capital securities 10 years 10 years
Gradual reflection of increase in insurance liabilities 16 years 10 years
Required Capital Gradual reflection of newly introduced risks 4 years (spread / concentration risk) 10 years (longevity, lapse, expense, catastrophe risk)
Gradual reflection of equity risk 7 years 10 years
Gradual reflection of interest rate risk – 10 years
Delay of timely corrective action 2 years 5 years
Extension of reporting and disclosure deadline 4 years 3 years
Selective Application
  • Gradual recognition of increase in mark-to-market insurance liabilities (TTP): 10 years
    1) (Method) Gradually deducting the “capital reduction” due to mark-to-market valuation of insurance liabilities during the elapsed period (if 2 years have passed since the previous evaluation or if the interest rate has changed by 50bps since e previous evaluation, all companies apply TTP must deduct the “capital deduction” recalculation
    2) (Condition) Subject to life / long-term non-life insurance liabilities, if K-ICS insurance liabilities at the time of initial application are greater than current insurance liabilities
  • Gradual recognition of newly introduced insurance risk (TIR): 10 years
    1) (Method) If the first year of implementation, all calculated new insurance risks are excluded (application rate of 0%), and the application rate is raised equally thereafter
    2) (Condition) Longevity risk, expense risk, lapse risk and catastrophe risk among general non-life insurance risks
  • Gradual recognition of increase in equity risk (TER): 10 years
    1) (Method) If the first year of implementation, only 60% of the calculated equity risk is recognized as required capital, and the application rate is raised equally thereafter
    2) (Condition) When 60% of the K-ICS equity risk is greater than the RBC equity risk
  • Gradual recognition of increase in interest rate risk (TIRR): 10 years
    1) (Method) If the first year of implementation, only 60% of the calculated interest rate risk is recognized as required capital, and the application rate is raised equally thereafter
    2) (Condition) When 60% of the K-ICS equity risk is greater than the RBC equity risk

    Application rate by year

    Application Year 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
    TTP application rate 100% 90% 80% 70% 60% 50% 40% 30% 20% 10%
    TIR application rate 0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
    TER & TIRR application rate 60% 64% 68% 72% 66% 80% 84% 88% 92% 96%
  • Delay in timely corrective action when insolvent: 5 years
    Even if the K-ICS ratio is less than 100% after applying transitional measures at the time of introduction, timely corrective action is postponed if RBC ratio exceeds 100%. A management improvement agreement is conducted, and the grace period will be cancelled if the contents of the management are not implemented during the grace period.
Common Application
  • Expansion of the scope of recognition of available capital for capital securities previously issued before implementation of the system: 10 years
    1) (Basic capital) In the case of hybrid capital securities issued before the implementation of the system, they do not fall under the basic capital under K-ICS, but are recognized as basic capital
    2) (Supplementary capital) All supplementary capital securities issued before the implementation of the system are recognized as supplementary capital, even if the amount exceeds the supplementary capital limit
  • Extension of business report submission and disclosure deadlines: 3 years
    1) The submission deadline for K-ICS related financial reports and management disclosures has been extended by 1 month during the elapsed period
    2) (Quarterly reporting) 2 months → 3 months (Annual reporting) 3 months → 4 months
Operating Standard
  • Apply through prior reporting process
    1) (Insurance company) Prepare and report the necessary documents to apply transitional measures
    2) (Supervisory authority) Review the consistency of submitted documents and notify whether or not they are accepted
  • Prior reporting period and required documents, etc.
    1) (Reporting period) Report within 2 months (expected on February 28, 2023) after the introduction of the system (January 1, 2023)
    2) (Required documents) Differentiations according to K-ICS ratio (based on 100%) before applying transitional measure
  • Follow-up management after reporting
    1) (Securing the adequacy of the results of applying transitional measures) Submit an adequacy verification report on the results of applying transitional measures included in the business report every quarter
    2) (Inducing self-rescue efforts) In the case of companies with a K-ICS ratio of less than 100% before applying transitional measures, the improvement plan implementation performance should be submitted after reporting to the board of directors every year (until the end of the improvement plan)
  • Measures to prevent abuse of transition measures
    1) Imposition of disclosure obligation regarding application of transitional measures
    2) RAAS assessment grade upper limit (maximum 3 grades)
    3) Reduction of remaining elapsed period in case of excessive outflow of capital
Company 2024.09 K-ICS 2024.06 K-ICS 2024.03 K-ICS
Before After Before After Before After
Life
Kyobo 170.1 222.3 161.2 214.0 175.8 238.9
NH 249.7 419.7 217.3 373.4 214.0 384.0
Heungkuk 161.3 213.9 156.5 209.3 160.4 211.6
KDB 66.3 179.5 58.8 155.4 44.5 129.2
DB 174.0 216.5 182.9 237.8 197.3 270.8
IBK 113.6 178.0 89.9/td>

205.7 89.3 194.0
IM (DGB) 131.0 178.0 135.1 192.6 154.3 236.8
Hana 161.4 226.6 111.7 162.8 106.0 154.7
Kyobo Life Planet 152.6 186.4 187.1 239.1 213.1 282.6
ABL 113.1 152.5 104.7 144.5 114.3 160.6
Fubon Hyundai 17.3 200.9 10.3 180.8 19.0 182.8
Chubb Life 156.5 200.0 168.3 228.6 188.9 281.2
Non-life
Hanwha 178.2 215.8 171.7 209.3 172.8 211.3
Lotte 128.7 159.8 139.1 173.1 146.4 184.0
Heungkuk 162.3 203.3 151.3 195.4 157.0 207.0
NH 211.2 290.1 223.5 306.6 232.3 318.1
MG 35.9 43.4 36.5 44.4 42.7 52.1
AXA 240.0 286.5 237.5 276.7 237.2 275.0
SCOR Re 152.6 172.8 148.8 168.2 148.2 164.6
2023
Company 2023.12 K-ICS 2023.09 K-ICS 2023.06 K-ICS 2023.03 K-ICS Effect of Each Transitional Measure 2023.03
Before After Before After Before After Before After Difference Available Capital Required Capital
Capital Reduction Insurance Equity Interest Rate
Life
Kyobo 193.8 265.4 183.2 276.6 179.6 269.4 156.0 232.4 +76.3 – -23,122 -3,511 –
NH 207.2 363.5 167.1 309.9 170.6 338.6 175.5 325.5 +150.0 – -9,732 -1,155 -7,117
Heungkuk 158.2 220.2 112.4 185.6 108.6 165.7 105.4 152.7 +47.3 – -6,709 -748 –
KDB 56.7 117.5 60.0 134.1 67.5 140.7 47.7 101.7 +54.0 +3,430 -2,722 -1,769 –
DB 213.9 306.7 200.8 399.0 202.9 384.1 202.4 361.0 +158.7 – -5,863 – –
IBK 80.1 202.3 64.3 178.7 79.8 178.3 68.7 165.9 +97.3 +2,190 -734 -259 -1,230
DGB 162.3 247.0 150.5 310.8 150.5 288.2 158.5 294.8 +136.3 – -1,840 -562 –
Hana 122.2 168.7 132.5 184.7 121.6 165.4 119.7 159.5 +39.8 +458 -428 -356 –
Kyobo Life Planet 121.6 185.8 182.6 313.0 175.4 288.2 163.8 254.4 +90.6 – -171 -35 –
ABL 130.0 186.0 109.1 168.1 113.2 172.2 111.4 163.6 +52.3 – -2,646 -1,238 –
Fubon Hyundai 23.9 192.5 5.0 163.8 5.6 144.5 -0.6 128.3 +128.9 +12,701 -637 -1,172 -2,288
Chubb Life 214.6 332.3 200.1 421.3 202.6 402.4 198.2 386.0 +187.8 – -717 – –
Non-life
Hanwha 183.3 232.7 190.4 283.1 177.5 260.9 176.7 254.4 +77.7 – -9,895 – –
Lotte 174.8 213.2 148.9 208.4 143.1 190.2 137.7 178.3 +40.6 – -4,276 – –
Heungkuk 158.0 229.2 160.7 272.3 132.3 211.5 132.3 204.0 +71.7 – -6.043 -827 -709
NH 248.2 316.8 226.1 306.0 240.1 332.7 237.7 330.2 +92.6 – -3,102 – –
MG 64.0 76.9 50.1 64.5 62.1 80.0 65.0 82.6 +17.5 – -1,349 -285 -506
AXA 233.5 269.7 245.8 297.0 235.0 277.0 230.8 267.0 +36.3 – -288 – –
SCOR Re 154.4 176.1 137.2 161.9 140.5 166.8 140.2 166.3 +26.1 – -553 – –
Total 139.8 218.9 +79.1 +18,779 -80,827 -11,917 -11,851