South Korean insurers gain capital as equity risk rises

Required capital also increased by $6.7b as the stock market rally expanded equity exposure.

South Korean insurers' capital adequacy ratios improved in the first quarter as higher earnings and gains from a stock market rally lifted available capital, although stronger equity risk also increased required capital, the country's financial regulator said.

The average Korean-Insurance Capital Standard (K-ICS) ratio, calculated using transitional measures, rose to 216.1% at the end of March from 212.3% three months earlier, according to the Financial Supervisory Service.

The ratio for life insurers increased to 207.7% from 205.9%, whilst non-life insurers' ratio climbed to 229.7% from 221.9%.

Excluding transitional measures, the industry's K-ICS ratio rose to 202.6% from 197.6% at the end of December.

Life insurers' ratio increased to 190.7% from 186.7%, whilst non-life insurers' ratio rose to 222.4% from 214.6%.

Available capital under K-ICS increased by $17.8b (KRW26.9t) during the quarter to $205.2b (KRW310.9t).

The regulator attributed the increase to insurers posting $3.0b (KRW4.5t) in net earnings and a $12.5b (KRW18.9t) rise in accumulated other comprehensive income following gains in the stock market.

Required capital also increased, rising by $6.7b (KRW10.1t) to $95.0b (KRW143.9t).

The regulator said equity risk expanded by $8.2b (KRW12.4t) because of the stock market rally, whilst higher interest rates reduced disability and morbidity risk by $2.2b (KRW3.4t).

($1.00 = KRW1,505.26)