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At the end of September last year, the solvency ratio of insurance companies fell by 6.4%p… Impact of interest rate rise, etc.

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The soundness indicators of domestic insurers declined due to the rise in market interest rates and the sluggish stock market.

According to the Financial Supervisory Service on the 11th, the solvency ratio (RBC) of insurance companies as of the end of September last year was 254.5%, down 6.4 percentage points (p) from the end of June.

The RBC ratio, which is calculated by dividing the available capital by the required capital, is an indicator of an insurance company’s financial soundness. Financial authorities recommend 150% or more.

The overall RBC ratio of insurance companies has been declining since the end of September 2020, 283.6%.

Compared to three months ago, life insurers’ RBC decline was relatively larger.

Samsung Life[032830]It fell 21.8%p lower to 311.3%, while DGB Life Insurance and Fubon Hyundai Life fell 24.3%p and 11.5%p, respectively. Kyobo Life Planet, an internet insurance company, fell 77.3%p, but the RBC ratio itself was good at 335.4%.

In the non-life insurance industry, Samsung Fire & Marine Insurance[000810]and Hana General Insurance fell 7.7%p and 14.8%p, respectively.

As of the end of June, the RBC ratio of MG non-life insurance, which had fallen below the insurance industry law standard, improved to 100.9% as the required capital decreased, bringing it closer to the legal standard. Then, in October, the RBC ratio increased slightly in the fourth quarter through a rights issue worth about 20 billion won.

Previously, in November of last year, MG Non-Life Insurance submitted a management improvement plan to raise the RBC ratio above the recommended level by the financial authorities by raising an additional 130 billion won by the end of March this year.

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The decline in the RBC ratio in the insurance industry is due to a decrease in available capital of 2.4 trillion won as market interest rates rise and stock prices fall, resulting in a 3.4 trillion won decrease in available-for-sale securities valuation gains.

Some insurance companies have increased the RBC ratio by reclassifying bonds as available-for-sale securities without actual capital expansion during low interest rates.

However, the FSS evaluated that the overall RBC ratio of the insurance industry, excluding MG non-life insurance, was at a good level.

An official from the Financial Supervisory Service said, “Currently, the RBC ratio of insurance companies is 254.5%, which is significantly higher than the 100% standard for fulfillment of insurance payment obligations.”

“We plan to strengthen monitoring of domestic and foreign interest rate fluctuations and the impact of the spread of COVID-19, so that if there is a risk that the RBC ratio will become weak, we will supervise it to improve financial soundness by inducing preemptive capital expansion.”

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