News Life and Health06 Feb 2018

South Korea:Foreign-currency denominated policies gain popularity

06 Feb 2018

Insurance companies are launching "foreign currency insurance," an insurance-based alternative to foreign currency deposits as the US dollar continues to weaken against the Korean won.

Foreign currency deposits have long been considered the top investment choice when the value of the US dollar drops in comparison to the Korean won. A large amount of capital is often moved around to take advantage of a drop in the dollar by putting money into foreign currency deposits as they guarantee a certain level of interest as well as future profit by changing it back to Korean won when the dollar value goes back up, reported JoongAng Daily.

Foreign currency insurance works in a similar manner but instead of putting money into a deposit account, subscribers pay an insurance premium in foreign currency, such as US dollars, and receive payments in the same currency. Interest rates on the policies are often higher than the 1% guaranteed on foreign currency deposits.

Some policies are designed in the form of universal life insurance, which means subscribers can choose to put in more money than the original amount they are obliged to pay.

While most foreign currency insurance is in the form of savings insurance or pension insurance, companies are expanding the scope and rolling out life insurance.

MetLife, for instance, recently introduced “MetLife Universal Dollar Life Insurance”, the first life insurance product that is denominated in US dollars. The company lowered policy fees by 15% to 20% compared to the industry average. It gives a 3.5% interest rate per year to subscribers.

One notable option that MetLife added to the product is allowing subscribers to pay a monthly premium in Korean won. The option works as a safeguard since the premium that Korean subscribers would have to pay in won will change each month due to fluctuations in the exchange rate. The company exchanges the total premium paid by the subscriber in Korean won to US dollars using the exchange rate prevailing at the time and credits the excess to the value of the policy.

The South Korean currency appreciated by almost 13% against the greenback in 2017 and is expected to continue to strengthen in 2018.


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