Best’s Market Segment Report: AM Best Maintains Stable Outlook on South Korea’s Non-Life Insurance Market

AM Best has maintained its stable outlook on South Korea’s non-life insurance segment, noting a continued refinement of the country’s domestic solvency standards that have helped strengthen insurers’ capital management.

Additional factors include moderate growth in the long-term and general insurance segments, and efforts to improve profitability in the former as well as in investment strategies. However, AM Best notes an offsetting factor of slow growth prospects and weakened underwriting profitability in South Korea’s auto insurance segment.

According to the Best’s Market Segment Report, “Market Segment Outlook: South Korea Non-Life Insurance,” the country’s non-life insurance industry is facing capital pressure with increasing insurance liabilities, following the Financial Supervisory Service’s (FSS) push for more realistic actuarial assumptions and a phased plan to cut discount rates until 2027, which are intended to improve credibility and comparability of insurers’ financials.

“These ongoing regulatory changes, coupled with a decreasing trend in domestic interest rates, are expected to pose a considerable burden on insurers’ solvency, especially those with relatively weaker capital positions,” said Seokjae Lee, senior financial analyst, AM Best. “However, AM Best expects these changes will promote economic value-based capital management for insurers to maintain sound capital adequacy across the industry.”

Over the next 12 months, AM Best expects the industry to experience moderate growth with heightened emphasis on profitability management of long-term insurance following a few years of intensified market competition and with a focus on mitigating increasing solvency pressures.

According to the report, the auto insurance segment has experienced a slowdown in its premium growth in recent years, owing to sluggish vehicle registrations and cumulative premium rate cuts to support the consumer economy. A notable trend is a high and increasing market concentration among large insurers. “With the fast-growing online auto insurance market, large insurers are more likely to maintain premium growth as they benefit from factors such as economies of scale, strong marketing capability and digital infrastructure,” said Chanyoung Lee, director, AM Best.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=354314.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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