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South Korea: Non-life insurers to turn more to hybrid securities

Source: Asia Insurance Review | Oct 2018

Fitch Ratings expects South Korean non-life insurers to increasingly rely on issuing hybrid securities, subordinated debt or fresh equity to strengthen their solvency adequacy, given progressive tightening in local statutory risk-based capital measures and upward movement in interest rates. 
Korean non-life insurers have material exposure to long-term saving and protection business, unlike their Asian peers. Fitch believes that streamlining of underwriting process, emphasis on the sales of protection-type policies and product re-pricing will enable insurers to steadily improve their value of new business margin. 
Insurers will also continue to manage the structure and duration of assets and liabilities ahead of the adoption of the IFRS17 accounting standard. Most insurers have extended their asset duration and improved their liability structure, such as increasing the ratio of floating-rate reserves to fixed-rate reserves.
In its report Korean Non-Life Insurance Market Dashboard 2018, the international rating agency says that it expects rated non-life insurers to maintain stable credit fundamentals in the near term as their surplus growth is likely to persist. Fitch believes that insurers’ ability to raise funds to support solvency and to withstand asset volatility is likely to be intact despite continued regulatory reform. A 
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