Korean non-life and life industry stands steady in 2024 – Fitch Ratings

Insurers are seen to exhibit enhanced financial performance in the short term, mainly because of improvement in investment yield and focus on higher-value-added businesses.

Korean life and non-life insurance will maintain a neutral 2024, despite the impact of the new accounting standards IFRS17 and IFRS9, as well as the introduction of the new solvency regime, K-ICS, within a high-interest rate environment, forecasted by Fitch Ratings.

The expectation is that insurers will exhibit enhanced financial performance in the short term, primarily attributed to a gradual improvement in investment yield and a strategic focus on higher-value-added businesses. However, potential challenges may arise from increased inflationary pressures on claims and elevated reinsurance costs.

Given the significance of capital strength under the new capital regime, K-ICS, Fitch emphasises insurers' efforts to fortify their capital position, reshape business portfolios, and refine investment strategies. 

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The adoption of value-added products, especially in the health sector, is anticipated to generate a higher Contractual Service Margin (CSM), crucial for insurers as it serves as a component of capital and is recognized as profit upon service fulfilment.

Fitch anticipates insurers will continue to underscore the importance of asset-liability management, extending the duration of their assets to align with liabilities. This strategic move aims to secure a more stable capital position in response to fluctuations in interest rates.