South Korean insurers to see steady earnings with CSM boost

However, the sector's capitalisation is expected to face continued pressure.

Amortisation of the contractual service margin (CSM) will be a key driver of earnings stability for South Korean insurers in 2025, according to Fitch Ratings. 

However, the sector's capitalisation is expected to face continued pressure from falling interest rates and tighter regulatory requirements.

Fitch said it expects the industry’s credit fundamentals to remain sound next year, supported by steady growth in new business CSM, which will help sustain capital levels. 

The average Korean Insurance Capital Standard (K-ICS) ratio fell to 197.9% in Q1 2025, down from 206.7% in 2024, mainly due to changes in liability discount rates and actuarial assumptions.

No further actuarial adjustments are expected in the second half of the year, which may ease financial strain on insurers.

Capital positions are being maintained through new business CSM generation and capital management strategies, including reinsurance and supplementary capital issuance.

Profitability remains moderate, backed by stable underwriting results and sound investment income, though Fitch cautioned that market volatility continues to pose risks.

South Korean insurers remain focused on asset-liability management, working to narrow duration mismatches and increasing allocations to domestic long-term bonds. 

Overseas investments remain largely hedged, limiting currency exposure.