Fitch ratings expects the Korean insurance sector's credit fundamentals to remain sound in 2025, as a steady generation of new business contractual service margin (CSM) will continue to support their capitalisation.
Fitch said that amortisation of Korean insurers' CSM will be a key contributor to their earnings stability, although capitalisation will remain under pressure from falling interest rates and regulatory tightening.
The sector’s average Korean Insurance Capital Standard (K-ICS) ratio declined to 197.9% in 1Q25 from 206.7% in 2024 following regulatory changes such as liability discount rate cuts and actuarial adjustments. Fitch does not expect further actuarial assumption adjustments in 2H25, which could ease financial pressure on insurers.
Insurers’ capital positions are supported by growth in new business CSM and capital management, including supplementary capital issuance and reinsurance. Profitability continues to be moderate so far in 2025, driven by stable insurance profits and sound investment returns, even as market volatility poses risks.
Insurers remain active in asset-liability management, as they seek to narrow duration gaps and increase allocation to domestic long-term bonds. Overseas investments remain well-hedged, minimising currency risks.