Insurance Company Loans Exceeding 12.6 Trillion Won... Joining Efforts to Tighten Household Loans

Financial Services Commission Chairman Ko Seung-beom is answering reporters' questions after the meeting between the Financial Services Commission Chairman and Financial Holding Company Chairmen held at the Korea Federation of Banks in Jung-gu, Seoul on the 10th. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Oh Hyung-gil] The insurance industry is strengthening loan management. In response to the financial authorities tightening household loans, new loan operations are being suspended. The scale of insurance company loans continues to show an increasing trend.

According to the Financial Supervisory Service, as of the end of June this year, the outstanding balance of household loans by insurance companies was 126.6 trillion KRW, an increase of 1.7 trillion KRW compared to the first quarter. Among these, mortgage loans amounted to 49.8 trillion KRW, up 1 trillion KRW from the end of March.

In addition, in the second quarter, insurance policy loans (contract loans) increased by 400 billion KRW, other loans by 200 billion KRW, and credit loans by 100 billion KRW.

During the same period, corporate loans increased by 3.4 trillion KRW from the previous quarter to 133.5 trillion KRW. Real estate project financing (PF) increased by 2 trillion KRW, while loans to large corporations and small and medium enterprises increased by 1.6 trillion KRW and 1.8 trillion KRW, respectively.

The total outstanding loan balance of insurance companies, combining household and corporate loans, reached 260.3 trillion KRW, 5.2 trillion KRW more than the previous quarter.

A Financial Supervisory Service official said, “We will strengthen inspections on the implementation status of household loan management by each insurance company and continuously monitor soundness indicators such as delinquency rates,” adding, “We plan to encourage sufficient provisioning for loan losses in response to COVID-19 and other factors.”

Insurance companies are proactively managing loans in advance.

On the 1st, DB Insurance announced that it will suspend credit loan operations until the end of the year. DB Insurance is the first among insurance companies to halt loans, planning not to handle credit loans through any of its operating channels.

KB Insurance also temporarily suspended new and additional stock loans (loans for stock purchase funds).

Samsung Life Insurance manages new household loans by setting the borrower's total debt service ratio (DSR) to a maximum of around 40%. This is not applied uniformly but ensures that the number of loans exceeding this threshold does not surpass a certain level. The DSR refers to the ratio of principal and interest repayments on all loans received from financial institutions relative to annual income. Banks apply a 40% limit, and secondary financial institutions apply 60%, but Samsung Life has set a stricter internal standard.

These decisions by insurance companies come as financial authorities have set targets for household loan growth rates while managing total household loans.

The financial authorities set the household loan growth target at 5-6% for this year and agreed with the insurance industry to keep the loan growth rate at 4.1%. Additionally, to prevent the 'balloon effect' where loan demand shifts to secondary financial institutions due to tightened bank loan regulations, they ordered that personal credit loan limits be restricted within annual income.

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