Insurance Companies' Capital Adequacy Ratio Reaches 212% at Year-End, Improving from Previous Quarter

Up 1.5% from the Previous Quarter
Driven by Rising Stock Prices and Increased Net Income

The capital adequacy ratio (K-ICS·K-ICS), which indicates whether an insurance company can pay insurance claims to policyholders on time, improved in the fourth quarter of last year compared to the previous quarter, driven by a rise in stock prices and an increase in net income.

According to the 'Status of Capital Adequacy Ratio as of the end of December 2025' released by the Financial Supervisory Service on May 13, the overall capital adequacy ratio of the insurance sector (based on post-transitional measures) was recorded at 212.3%. This represents a 1.5 percentage point increase from the previous quarter's 210.8%. Life insurance companies posted a ratio of 205.8%, up 4.4 percentage points from the previous quarter, while non-life insurers also saw an increase of 2.2 percentage points to 221.9%. The transitional measures refer to a system that allows insurance companies to calculate the capital adequacy ratio under relaxed standards for a certain period, in order to cushion the impact from the introduction of IFRS17, the new accounting standard.

The upward trend in insurers' K-ICS ratios was mainly due to an increase in valuation gains stemming from a bullish stock market. However, the amount of required capital also rose as stock-related risk amounts expanded.

In the fourth quarter of last year, insurers' available capital reached 248 trillion won, an increase of 9.3 trillion won. Although there were capital-reducing factors such as a decrease in the contractual service margin (CSM), which represents future profits, and settlement dividends, net income rose and other comprehensive income surged significantly due to higher stock prices.

During the same period, required capital amounted to 133.8 trillion won, up 3.5 trillion won from the previous quarter. The risks associated with disability, disease, and interest rates decreased due to higher interest rates, but the risk amount related to stocks expanded due to rising stock prices.

The Financial Supervisory Service stated that, given the recent increase in uncertainty in financial markets due to the situation in the Middle East, it will focus its supervisory capabilities on ensuring that insurance companies secure sufficient capital adequacy, which is directly linked to their crisis response capabilities.

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