By Park Na-eun and Minu Kim | Maeil Business News Korea | March 13, 2025<\/p>\n
South Korea\u2019s financial authorities are set to revise the key capital regulation for insurers, lowering the recommended solvency ratio (K-ICS) by 10 to 20 percentage points from the current 150 percent for the first time in 24 years.<\/p>\n
Instead, regulators will introduce a new requirement based on insurers\u2019 core capital, including paid-in capital and retained earnings, as part of a two-pronged strategy to improve the quality of capital.<\/p>\n
The change is expected to curb the practice of issuing hybrid capital securities, which has been a common means of boosting regulatory capital.<\/p>\n
The Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) announced on Wednesday that they discussed these measures during the seventh Insurance Reform Meeting held on Tuesday.<\/p>\n
The authorities plan to establish a task force and conduct stress tests before finalizing the new K-ICS supervisory standards by mid-2025, with implementation set for the end-of-year financial statements.<\/p>\n
One key revision under review is lowering the recommended K-ICS solvency ratio from 150 percent by 10 to 20 percentage points.<\/p>\n
The K-ICS ratio measures an insurer\u2019s available capital against the capital required to cover policyholder obligations.<\/p>\n
While the legal minimum requirement is 100 percent, regulators have strongly recommended maintaining at least 150 percent.<\/p>\n
The adjustment is aimed at relieving the financial burden on insurers, which has intensified since the adoption of IFRS 17 in 2023.<\/p>\n
Under the new accounting standard, insurers have been required to hold significantly more capital to maintain solvency ratios.<\/p>\n
As a result, required capital surged from 68 trillion won ($46.8 billion) at the end of 2022 to nearly 119 trillion won by the end of 2024, leading to a sharp decline in the K-ICS ratios of some insurers.<\/p>\n
\u201cLowering the recommended solvency ratio will ease insurers\u2019 capital accumulation burden, which is a positive step,\u201d said an industry official.<\/p>\n
In addition to adjusting the K-ICS solvency ratio, financial authorities will also introduce a mandatory core capital ratio requirement as a prompt corrective action standard, along with a disclosure obligation.<\/p>\n
Previously, the core capital ratio was merely a subcomponent of the overall risk assessment and received little attention from insurers.<\/p>\n
However, data shows that the core capital ratio fell from 145.1 percent in March 2023 to 132.6 percent in September 2024.<\/p>\n
Unlike the general solvency ratio, the core capital ratio considers only fundamental financial resources, such as paid-in capital and retained earnings, while excluding supplementary capital raised through subordinated bonds or hybrid capital securities.<\/p>\n","protected":false},"excerpt":{"rendered":"
By Park Na-eun and Minu Kim | Maeil Business News Korea | March 13, 2025 South Korea\u2019s financial authorities are set to revise the key capital regulation for insurers, lowering the recommended solvency ratio (K-ICS) by 10 to 20 percentage points from the current 150 percent for the first time in 24 years.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","neve_meta_sidebar":"","neve_meta_container":"","neve_meta_enable_content_width":"off","neve_meta_content_width":70,"neve_meta_title_alignment":"","neve_meta_author_avatar":"","neve_post_elements_order":"","neve_meta_disable_header":"","neve_meta_disable_footer":"","neve_meta_disable_title":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[9,3],"tags":[],"class_list":["post-1996","post","type-post","status-publish","format-standard","hentry","category-korea","category-news"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/insurance.vincent-chen.com\/en\/wp-json\/wp\/v2\/posts\/1996","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/insurance.vincent-chen.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/insurance.vincent-chen.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/insurance.vincent-chen.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/insurance.vincent-chen.com\/en\/wp-json\/wp\/v2\/comments?post=1996"}],"version-history":[{"count":1,"href":"https:\/\/insurance.vincent-chen.com\/en\/wp-json\/wp\/v2\/posts\/1996\/revisions"}],"predecessor-version":[{"id":1997,"href":"https:\/\/insurance.vincent-chen.com\/en\/wp-json\/wp\/v2\/posts\/1996\/revisions\/1997"}],"wp:attachment":[{"href":"https:\/\/insurance.vincent-chen.com\/en\/wp-json\/wp\/v2\/media?parent=1996"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/insurance.vincent-chen.com\/en\/wp-json\/wp\/v2\/categories?post=1996"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/insurance.vincent-chen.com\/en\/wp-json\/wp\/v2\/tags?post=1996"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}