Korea’s non-life insurers face capital pressure and slow auto segment growth

Regulatory changes are posing a burden on the insurers’ solvency.

South Korea’s non-life insurance industry is facing capital pressure with increasing insurance liabilities.

Over the next 12 months, the industry is expected to experience moderate growth with heightened emphasis on profitability management of long-term insurance, according to a report by AM Best on 3 June 2025, where it maintained its stable outlook on the segment.

Continued refinement of the country’s domestic solvency standards has reportedly helped strengthen insurers’ capital management.

The Financial Supervisory Service (FSS) has been pushing for “more realistic actuarial assumptions” and a phased plan to cut discount rates until 2027.

These regulatory changes and the decreasing interest rates are expected to pose a considerable burden on the insurers’ solvency, 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,” Lee added.

Other risks include slow growth prospects and weakened underwriting profitability in South Korea’s auto insurance segment.

The auto insurance segment has experienced a slowdown in its premium growth in recent years, on the back of sluggish vehicle registrations and cumulative premium rate cuts to support the economy, according to AM Best.

AM Best also noted increasing market concentration amongst 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.