AM Best maintains stable outlook on South Korea’s non-life insurance market

Credit rating agency AM Best has maintained its stable outlook on South Korea’s non-life insurance segment, citing continued improvement of the country’s domestic solvency standards, which have helped strengthen insurers’ capital management practices.

Additional factors include moderate growth in the long-term and general insurance segments, and efforts to improve profitability in the former as well as in investment strategies.

However, AM Best cautions against slow growth and deteriorating underwriting profitability within South Korea’s auto insurance market.

According to the Best’s Market Segment Report, “Market Segment Outlook: South Korea Non-Life Insurance,” the country’s non-life insurance industry is facing capital pressure with increasing insurance liabilities, following the Financial Supervisory Service’s (FSS) push for more realistic actuarial assumptions and a phased plan to cut discount rates until 2027, which are intended to improve credibility and comparability of insurers’ financials.

Seokjae Lee, senior financial analyst, AM Best, said: “These ongoing regulatory changes, coupled with a decreasing trend in domestic interest rates, are expected to pose a considerable burden on insurers’ solvency, especially those with relatively weaker capital positions.

“However, AM Best expects these changes will promote economic value-based capital management for insurers to maintain sound capital adequacy across the industry.”

Looking ahead, the credit agency predicts moderate growth for the country’s industry over the next 12 months. This is expected to come with heightened emphasis on profitability management of long-term insurance following a few years of intensified market competition and with a focus on mitigating increasing solvency pressures.

According to the report, auto insurance premium growth has slowed recently. This is due to fewer vehicle registrations and insurers lowering rates to aid consumers. Notably, the market is becoming more concentrated among larger companies.

“With the fast-growing online auto insurance market, large insurers are more likely to maintain premium growth as they benefit from factors such as economies of scale, strong marketing capability and digital infrastructure,” said Chanyoung Lee, director, AM Best.

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