60 Trillion Won in Insurance Company Retirement Pensions... Yield Only '1%'

Status of Retirement Pension Reserves (Source: Korea Insurance Research Institute)

[Asia Economy Reporter Oh Hyung-gil] Among the retirement pensions exceeding 220 trillion won, more than 60 trillion won flowed into the insurance industry. Although some life insurance companies actively sought to attract retirement pensions, resulting in a significant increase, the rate of return remained at a low level. There are calls for measures to improve profitability.

According to the Korea Insurance Research Institute on the 13th, the life insurance industry's retirement pension reserves reached 49.9 trillion won last year, a 15.6% increase compared to the previous year. The non-life insurance industry also recorded 12.5 trillion won, up 7.2% from the previous year.

Out of the total retirement pensions of 221.2 trillion won, 62.4 trillion won flowed into the insurance industry, accounting for a 28.2% market share.

Among the total retirement pension reserves, banks accounted for 112.6 trillion won, a 16.8% increase from the previous year, while the financial investment sector reached 43.6 trillion won.

The institute explained, "While the increase in life insurance retirement pension reserves was significant, the increase in non-life insurance retirement pension reserves remained at a similar level to the previous year. This is because some life insurance retirement pension providers strengthened their marketing for new retirement pension sales, leading to a substantial increase in premium income."

Retirement pension premium income also rose, with life insurance increasing by 46.0% to 24.6 trillion won and non-life insurance increasing by 9.3% to 11.8 trillion won compared to the previous year.

The institute forecasted that this year, retirement pension premium income will increase by 8.4% for life insurance and 5.5% for non-life insurance compared to the previous year, due to the expansion of the Individual Retirement Pension (IRP) market and some insurers' strategies to strengthen retirement pension capabilities.

However, due to the impact of the novel coronavirus disease (COVID-19), the rate of return on insurers' retirement pensions mostly fell to the 1% range.

According to the Life Insurance and Non-life Insurance Associations, the first-quarter defined benefit (DB) type retirement pension rates of return for the 'Big 3' life insurers were 1.78% for Samsung Life, 1.91% for Hanwha Life, and 1.29% for Kyobo Life, all lower than at the end of last year.

In contrast, IBK Pension and Shinhan Life maintained rates of return in the 2% range at 2.07% and 2.06%, respectively.

The defined contribution (DC) type saw a larger decline in rates of return than the DB type. It is understood that the DB type, mostly enrolled in principal-guaranteed products investing in bonds, was not affected by stock market volatility caused by COVID-19.

Samsung Life and Hanwha Life saw their rates of return fall from 2.93% and 2.66% at the end of last year to 0.69% and 0.94%, respectively. Kyobo Life, which recorded a 3.24% rate of return at the end of last year, dropped to -0.36%. Mirae Asset Life also fell from 4.28% to 0.19%.

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