Will the '30% Overseas Investment Rule' for Insurance Companies Be Hindered in the National Assembly (Comprehensive)?

[Asia Economy Reporter Oh Hyung-gil] The long-standing wish of the insurance industry to ease overseas investment regulations has effectively been dashed in this National Assembly session. Insurers, who had hoped that the relaxation of overseas investment limits would provide relief for asset management, are left in a state of shock. The prolonged low-interest-rate environment has made it difficult for insurers to secure asset management returns, and now a red light has been lit for their long-term asset acquisition as well.

On the 5th, the National Assembly's Political Affairs Committee is scheduled to hold its second plenary session in the afternoon to review the amendment to the Insurance Business Act, which includes easing asset management limits on foreign currency assets. Even if it passes the plenary session, the amendment is expected to be discarded.

According to the legislative process of the National Assembly, which proceeds through the Political Affairs Committee plenary session, the Legislation and Judiciary Committee review, and the plenary session approval, the Legislation and Judiciary Committee was held on the 4th, and the plenary session is scheduled for the same day, making it physically impossible to process the bill. With the 21st National Assembly elections scheduled for the 15th of next month, and the interim session lasting only about two weeks, followed by the start of the full-scale election campaign, it is widely expected that the bill's passage is out of reach.

Insurers are clearly disappointed. After passing the Political Affairs Committee's bill review subcommittee on the 21st of last month, the plenary session was scheduled for the 27th, raising expectations for the bill's passage. However, the plenary session was canceled due to the rapid spread of COVID-19.

They can only hope for a one-point plenary session to handle livelihood bills, but even that remains uncertain. Since bills not passed within this session will all be discarded, the new 21st National Assembly will have to start the bill process anew.

The amendment mainly aims to raise the limits on insurers' investments in foreign currency assets such as foreign exchange and foreign real estate from the current 30% of total assets for general accounts and 20% of each special account's assets for special accounts to 50% respectively.

With the implementation of the new International Financial Reporting Standard (IFRS17) in 2022, insurers will mark insurance liabilities and assets at fair value, making securing long-term assets increasingly important. However, the domestic market suffers from a severe shortage of ultra-long-term bonds, and safe assets cannot meet demand, necessitating an increase in foreign currency assets.

Some insurers already have overseas investment ratios approaching 30%. Six insurers have foreign currency securities exceeding 20% of their general account managed assets.

Hanwha Life's ratio of foreign currency securities to managed assets has risen to 29.3%, just below the 30% limit. Fubon Hyundai Life (26.2%), Chubb Life Insurance (24.9%), Kyobo Life (22.8%), Tongyang Life (22.4%), and Nonghyup Life (21.4%) also record significant proportions.

Additionally, the amendment includes expanding the understanding assessment conducted on insurance contracts to insurance information materials and changing the penalty imposition target for failure to notify the right to request an interest rate reduction from employees to the insurance company.

An insurance industry official said, "As the U.S. lowers its benchmark interest rate and the low-interest-rate era is prolonged, easing overseas investment regulations is urgent to improve asset management returns," adding, "Even if the bill is discarded and reintroduced in the next National Assembly, the damage insurers must endure in the meantime will be considerable."

Meanwhile, according to the Korea Insurance Research Institute, 61 amendments to the Insurance Business Act were proposed in the 20th National Assembly, but only 10 bills passed the plenary session. The remaining 51 bills were not processed. Simplification of claims for indemnity insurance also failed to pass this National Assembly due to strong opposition from the medical community, and efforts to strengthen insurers' obligation to explain insurance payment status to consumers were also abandoned.

This content was produced with the assistance of AI translation services.