Capital Requirements for Small Short-Term Insurance Companies Relaxed to 2 Billion Won

Financial Services Commission Announces Legislative Notice for Amendment to Enforcement Decree of Insurance Business Act

[Asia Economy Reporter Lee Kwang-ho] Financial authorities are significantly easing the capital requirements for small-amount short-term specialized insurance companies from the existing 30 billion KRW to 2 billion KRW. Additionally, to enhance the soundness of the insurance industry, they will establish an external verification process for reserve liabilities and allow ownership of subsidiaries such as healthcare and MyData companies.

The Financial Services Commission announced on the 4th that it will publicly notify the amendment to the "Enforcement Decree of the Insurance Business Act" containing these details.

First, the minimum capital for small-amount short-term specialized insurance companies has been set at 2 billion KRW. This considers the purpose of revitalizing small-amount short-term insurance, the fulfillment of human and material requirements for consumer protection, and the possibility of meeting financial soundness (RBC) standards. The FSC plans to review additional adjustments to capital requirements in the future, considering the demand for new entrants and the stable establishment of the system.

Except for long-term coverage (pensions, nursing care) and high-capital-required categories (nuclear power, automobiles, etc.), all categories will be allowed to promote small-amount short-term insurance.

Also, considering unexpected risk occurrences, the enforcement decree and supervisory regulations will set the insurance period to one year. For consumer protection, the insurance payout limit is set at 50 million KRW, the deposit insurance protection limit, and the annual total premium income is set at 50 billion KRW, similar to Japan. Insurance companies with total assets exceeding 1 trillion KRW must undergo verification of the adequacy of reserve liabilities by external independent actuaries.

Furthermore, the scope and procedures related to insurance companies' ownership of subsidiaries have been organized. It has been clarified that insurance companies can own subsidiaries such as personal credit information management businesses and healthcare specialized companies. Although subsidiary ownership was allowed through interpretation of the enforcement decree, opinions reflecting the need to clarify the legal basis to revitalize new industries were incorporated.

The public notification period will be held for 40 days from the 5th to the 17th of next month.

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