Meritz Fire & Marine Insurance will be recapitalised by KRW70 billion ($63.2 million) through a placement under its parent Meritz Financial Group to help bolster its capital base ahead of the 2021 new accounting standards.
Under the rights offering plan approved by the board of Meritz Fire & Marine Insurance on 20 June, 3,342,000 common shares will be allocated to the main shareholder at KRW20,950 apiece. The additional share allocation will increase the holding entity’s stake in the insurer to 53.4%, reports Pulse News.
“This is a preemptive move to boost the insurer’s capital reserves in preparation for the International Financial Reporting Standard (IFRS) 17 Insurance Contracts,” said a Meritz Financial Group official. Meritz Fire's shareholders' equity stood at KRW1.8 trillion at the end of 2017.
Insurers in Korea are under pressure to bolster their capital base because the IFRS17 rules, which will come into force in 2021, require financial institutions to report liabilities on a mark-to-market basis rather than book value.