High interest rates threaten Korean insurers' profitability

The profitability of Korean non-life generally falls below the ratio guidelines.

South Korea’s non-life insurers – CI Guarantee (CIG), Korea Finance for Construction (KFINCO), Construction Guarantee (CG), and Seoul Guarantee Insurance (SGI) – have shown strong capitalisation and leverage, Fitch Ratings said.

These companies possess sufficient capital strength, reflected in their Prism Global scores and risk-based capital ratios, ensuring they can handle unexpected guarantee claims.

However, Fitch ranks the company profiles of these insurers differently based on their operational scale, business risk, diversification, and corporate governance. 

Despite their dominance in niche markets, these companies hold relatively small market shares within the broader non-life insurance industry in Korea.

Fitch also notes that the profitability of Korean non-life insurers generally falls below the ratio guidelines for their respective Insurer Financial Strength (IFS) Ratings. 

This is largely due to their strategic focus on fostering the growth of specific industries, which makes them more vulnerable to economic downturns. 

With ongoing high interest rates, Fitch anticipates that these insurers could face increased claim ratios, particularly due to pressures on real estate and project-financing loans.