Insurance Companies' Financial Soundness Deteriorates... RBC Ratio Declines

As of December 2019, Insurance Companies' Risk-Based Capital (RBC) Ratio (Source: Financial Supervisory Service)

[Asia Economy Reporter Oh Hyung-gil] The financial soundness of insurance companies deteriorated at the end of last year.

According to the Financial Supervisory Service on the 27th, the Risk-Based Capital (RBC) ratio of insurance companies as of the end of last year was 269.5%, down 17.4 percentage points from 286.9% at the end of September.

Life insurance companies decreased by 16.5 percentage points from 301.2% to 284.6%, and non-life insurance companies decreased by 18.9 percentage points from 260.0% to 241.2%.

Among life insurers, Prudential Life had the highest ratio at 424.3%, while DGB Life had the lowest at 169.1%.

Among non-life insurers, DAS Legal Expense Insurance reached 2035.7%, while MG Non-Life Insurance recorded the lowest at 117.1%.

The RBC ratio, which is calculated by dividing available capital by required capital, is an indicator used to measure the financial soundness of insurance companies. The Insurance Business Act mandates maintaining this ratio above 100%.

Due to the rise in market interest rates, other comprehensive income such as bond valuation losses decreased, and available capital fell by 4 trillion won in the fourth quarter, reflecting planned shareholder cash dividends.

On the other hand, required capital increased by 2.1 trillion won due to factors such as an increase in operating assets and strengthened calculation standards for variable guarantee risk, leading to increases in credit and market risk amounts.

A Financial Supervisory Service official stated, "Currently, the RBC ratio of insurance companies significantly exceeds the 100% standard required to fulfill insurance payment obligations. However, if concerns arise regarding RBC ratio vulnerabilities, we plan to strengthen crisis situation analysis and proactively enhance financial soundness through capital expansion and other measures."

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