At the Regular National Assembly, the Samsung Life Insurance Act Becomes a 'Hot Potato,' Sparking Controversy as the 'Samsung Dissolution Act'

Calculation of Market Value for Affiliate Stock Holding Limits in the 'Insurance Business Act Amendment'
"Samsung Electronics Transferred Crisis... Asset Regulation Fairness Must Be Ensured"
"Suddenly Forced to Sell Legally Owned Stocks?" Confusion Ensues

[Asia Economy Reporter Oh Hyung-gil] As the first regular session of the 21st National Assembly begins, controversy over the so-called 'Samsung Life Insurance Act,' which could shake not only the insurance industry but also the capital market, is resurfacing.

Ruling party lawmakers belonging to the National Assembly's Political Affairs Committee have expressed their intention to speed up legislation, aiming to make up for their failure in the previous session. If this bill passes, Samsung Life Insurance and Samsung Fire & Marine Insurance will have to sell their shares in Samsung Electronics, inevitably shaking the governance structure that links 'Samsung C&T → Samsung Life Insurance → Samsung Electronics.'

This is why the worst-case scenario of turning into a 'company without an owner' is being raised. While the purpose is stated as aligning regulatory fairness among financial industries, there is also considerable criticism that the bill excessively restricts a specific company.

◆ "Only insurance companies get special treatment... The principle of fairness must be upheld" = According to political and insurance industry sources on the 2nd, Democratic Party lawmakers Park Yong-jin and Lee Yong-woo have proposed a partial amendment to the Insurance Business Act, known as the 'Samsung Life Insurance Act.'

The amendment aims to change the evaluation standard for insurance companies' holdings of other companies' stocks in Article 106 of the Insurance Business Act from acquisition cost to market value. Under the current law, insurance companies are not allowed to hold affiliate stocks exceeding '3% of total assets.' If the amendment passes, Samsung Life Insurance and Samsung Fire & Marine Insurance would be the only insurers required to dispose of their holdings. This is seen as targeting Samsung.

Samsung Life Insurance currently holds 508.16 million shares of Samsung Electronics (8.51% stake). Based on the acquisition cost in 1980, the shares were valued at about 544 billion KRW at around 1,000 KRW per share. Samsung Life Insurance's assets total 309 trillion KRW, so the holdings account for about 0.1% of total assets, well below the '3%' limit.

However, if evaluated at market value, Samsung Electronics' stock price was 54,200 KRW as of September 1. Applying this, the value of Samsung Electronics shares held by Samsung Life Insurance exceeds 27 trillion KRW, amounting to about 9% of Samsung Life Insurance's assets. If the amendment is enforced, Samsung Life Insurance would be forced to sell over 20 trillion KRW worth of Samsung Electronics shares.

Proponents of the amendment argue that the current Insurance Business Act applies different standards from other financial industries, violating fairness.

Banks, savings banks, and financial investment companies calculate asset management ratios based on book values in financial statements that reflect market values such as total assets and equity capital, but only insurance companies receive special treatment, they claim.

Insurance companies must match the maturity of insurance benefit payments with the maturity of managed assets, and if holdings are evaluated at acquisition cost, a gap between market value and book value can occur. Lawmaker Park Yong-jin criticized at the Political Affairs Committee meeting in July, saying, "Depending on fluctuations in Samsung Electronics' stock price, the impact on Samsung Life Insurance is 20 times greater than on other companies."

The financial authorities largely agree with these criticisms but say there is no way to force Samsung Life Insurance to sell its shares. Son Byung-doo, Vice Chairman of the Financial Services Commission, said at the National Assembly Budget and Accounts Special Committee on the 31st, "Under current laws and principles, we cannot force Samsung Life Insurance to sell shares and can only request voluntary cooperation from the company."

[Image source=Yonhap News]

◆ "Stocks held legally for a long time, suddenly forced to sell" = There are also concerns that the amendment to the Insurance Business Act, known as the 'Samsung Life Insurance Act,' could excessively infringe on the management of a specific company. If the amendment's purpose is to prevent unfair support to affiliates, the regulation should be based on the acquisition cost at the time of share acquisition.

Moreover, only South Korea and Japan regulate investment limits separately for major shareholders or affiliates worldwide. When Japan introduced market value evaluation in 2001, it evaluated subsidiary and related company stocks at acquisition cost, and other securities at the lower of acquisition cost or market value.

Additionally, evaluating holdings at market value could cause greater confusion due to stock price volatility. An insurance industry official said, "If the stock price of the company falls, the support limit for that company increases, which is the opposite effect," adding, "Depending on stock price fluctuations, additional purchases or sales of shares may occur, destabilizing asset management standards."

There are also voices that it is difficult to see a decline in the stability or efficiency of insurance companies' asset management just because the value rises after share acquisition. Samsung Life Insurance earned dividend income of 710 billion KRW from Samsung Electronics last year, and it is difficult to find alternative investments to replace this in a low-interest-rate environment.

Concerns have been raised that forced share sales could infringe on property rights, affecting not only Samsung Life Insurance shareholders but also the domestic stock market.

A business community official said, "Other affiliates should secure Samsung Electronics shares, but this ultimately pressures Samsung to pay taxes," emphasizing, "The impact on the economy as well as the financial sector must be considered from multiple angles."

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