Page 36 - Digital Edition SIRC Supplement

MARKET REPORT - KOREA

Seeking growth in the new
normal

While Korea’s insurance market is unlikely to repeat its remarkable growth of the
past decades, there are still plenty of growth opportunities in the new normal,
says Mr Jong-Gyu Won, President & CEO, Korean Re.,

Overview of Korean insurance market insurance loss ratios, underwriting income decreased 15.8%.
Premium income The net income of life insurers increased 15.7% to KRW3.2
The Korean insurance market grew by 4.4% in 2014, with trillion. Amid decreasing new business and increasing interest
both the life and non-life insurance sectors delivering better rate risk, their underwriting income dropped, but non-operating
performance than in the previous year (See Diagram 1). income increased due to one-off factors like a refund of fines
The life insurance market recovered from a contraction in imposed by the Fair Trade Commission.
2013, backed by a robust growth of group life insurance and Insurance penetration
retirement annuity. The total life premiums increased by 1.9% Korea’s insurance penetration is expected to increase by 0.4%p
to KRW110.6 trillion (US$92.6 billion). The non-life insurance to 13% in 2015 as premium income growth will likely exceed
market recorded an 8.3% increase in premium income due the nominal economic growth rate. The insurance penetration
to an improvement in long-term and motor insurance. The rates are estimated at 7.7% for life and 5.3% for non-life, up
retirement annuity business of non-life insurers also showed 0.3%p and 0.1%p respectively from 2014 (See Diagram 2).
a notable performance, contributing to the overall growth of Diagram 2: Insurance penetration trends
the non-life insurance market.
Life Insurance FY 2012 FY 2013 FY 2014 FY 2015 (E)
In 2015, the insurance market is expected to grow by 7.5% Non-life Insurance
as it will likely gain further momentum from the retirement 8.3% 7.1% 7.4% 7.7%
annuity market. Life insurance premiums are projected to Total 4.9% 4.9% 5.2% 5.3%
increase by 7.9% due to the government’s drive to develop the 13.3% 12.0% 12.6% 13.0%
private pension market. As for non-life insurance, a 7% growth
is expected on the back of a strong performance of the long- Solvency
term, motor and retirement annuity markets. The insurance industry in Korea remains fairly strong in terms
Loss ratio of solvency. As of June 2015, the average RBC ratio of insurers
In 2014, non-life insurance claims totaled KRW58 trillion, up was 278.2%, far above the regulatory minimum of 100%. The
5.6% from the previous year. The loss ratios increased in all ratio of life insurers averaged 291.9%, down 28.2%p from
lines of business except for marine and guarantee insurance, the first quarter of this year while non-life insurers recorded
and the average loss ratio rose by 1.1%p to 85%. As for life 250.9%, down 14.4%p. The decreases reflect a decline in
insurance, the total claims paid increased by 4.9% to KRW43 mark-to-market gains following an increase in bond yields in
trillion, with the loss ratio going up by 2.1%p to 56.3%. the second quarter (See Diagram 3).
Net income
Insurers recorded KRW5.6 trillion in net income, up 16.9%,
driven by an increase in investment income. The net income
of non-life insurers grew by 18.5% to KRW2.4 trillion, driven
by a 16.3% increase in investment income. Due to rising motor

Diagram 1: Premium income trends

FY 2013* FY 2014 FY 2015 (E)
Growth Rate
Premiums Growth Rate Premiums 1.9% Premiums Growth Rate
110.6 8.3%
Life Insurance 77.2 -8.0% 76.6 4.4% 119.4 7.9%
Non-life Insurance 187.2
53.8 4.2% 81.9 7.0%
Total
131.0 -3.4% 201.3 7.5%

*FY 2013 covers nine months from April to December as the fiscal year was shifted from the April-March period to the January-
December period.

34 SIRC Supplement • November 2015 • www.asiainsurancereview.com Back to Contents