Insurance Companies Limit Credit Loans to Annual Income... Strengthening Loan Management in the Insurance Industry

[Asia Economy Reporter Oh Hyung-gil] As financial authorities tighten regulations on household loans across the board, insurance companies have also begun managing household loans. First, the credit loan limit will be reduced to within the annual income.

According to the insurance industry on the 24th, the General Insurance Association held a non-face-to-face video conference with its member companies regarding household loans on the morning of the same day. The Life Insurance Association is also scheduled to hold a meeting related to household loans in the afternoon and convey the relevant details.

An insurance industry official said, "We discussed the requests such as the total loan volume target management conveyed by the authorities last week with the member companies," adding, "We urged them to cooperate as much as possible."

This follows the Financial Supervisory Service's request on the 20th for the Life and General Insurance Associations to limit individual credit loan limits to the annual income.

Additionally, insurance companies are expected to reduce loan demand by strengthening loan document screening and reducing preferential interest rates previously offered to preferred customers.

Insurance loan interest rates are also expected to rise. This year, with the increase in government bond yields, the mortgage loan interest rates of insurance companies have been on an upward trend. Samsung Life's average mortgage loan interest rate is 3.13% per annum, up 0.49 percentage points from 2.64% in the same period last year. Hanwha Life and Kyobo Life recorded 3.06% and 3.17%, respectively, increasing by 0.47 percentage points and 0.18 percentage points compared to last year.

However, except for Samsung Life, other insurance companies still have some leeway compared to the growth target rate (4.1%) set by financial authorities, so the atmosphere is that it is not yet the stage to take drastic measures such as suspending loans.

According to the Life Insurance Association, the scale of insurance company loans reached 151.7925 trillion KRW by May this year, a 5.6% increase compared to 143.6955 trillion KRW in the same period last year. It also increased by 1.4% over five months compared to the end of last year. At the end of last year, insurance loans amounted to 149.6392 trillion KRW, a 5.4% increase from 141.9949 trillion KRW at the end of 2019, before COVID-19.

Specifically, mortgage loans were the largest at 50.9965 trillion KRW, followed by insurance policy loans (contract loans) at 46.0168 trillion KRW, and credit loans at 30.6587 trillion KRW.

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