In all of 2024, the Korean life insurance market recorded a combined net profit of KRW5.6tn ($4.26bn), a 7.1% increase from KRW5.3tn in the previous year.
Moody’s Ratings analyst Gil Jo said that this was primarily driven by higher investment profits.
Net insurance profit, however, declined by 15.7% y-o-y, mainly due to intense sales competition and stricter regulations that weighed on their net underwriting results.
“The strengthened regulations and declining interest rates led to a 21.7% reduction in insurers’ shareholders’ equity. Meanwhile, net investment profit showed notable improvement in 2024, increasing by 80.9%, mainly thanks to favourable capital market conditions, steady interest income and lower finance costs,” Mr Jo said.
On a more challenging note, Mr Jo said, most insurers faced a stark deterioration in their regulatory solvency in 2024.
The life insurance industry’s average regulatory solvency ratio before applying the transitional measures, or Korea Insurance Capital Standards (K-ICS) ratio, stood at 183% at the end of 2024, a decline of around 26 percentage points compared to year-end 2023, he said.
This was primarily driven by strengthened capital regulations aimed at preventing the underestimation of underwriting risks and the overestimation of future insurance profits.
He said insurers’ regulatory solvency will remain under pressure over the next 12-18 months, considering the potential declines in interest rates and continuous regulatory strengthening of the discount rate which will persist in phases until 2027.