Higher core capital rule lifts South Korean insurers’ funding costs

Insurers whose core capital ratio falls below 50% will be subject to corrective measures.

South Korea’s financial regulator said on 13 January that insurers will be required to meet a higher capital quality standard starting in 2027, with a new minimum ratio for core capital under the Korean Insurance Capital Standard (K-ICS).

The Financial Services Commission (FSC) said the ratio of core capital to required capital will be set at 50% or higher, reported the Yonhap News Agency. 

Core capital includes paid-in capital and retained earnings, and the rule is meant to ensure insurers have enough high-quality capital to absorb losses from market volatility or financial stress.

The regulator said the move will raise funding costs for insurers, as equity capital is generally more expensive than other sources such as subordinated debt.

Insurers whose core capital ratio falls below 50% will be subject to corrective measures, although the FSC said a grace period will be provided.