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MARKET REPORT - KOREA
Diagram 3: Trends of RBC ratio Business strategy
In the face of the changing business environment, insurance
companies need to focus on capital management
340 336.6 (Unit: %) in ways that strengthen their solvency. It is also
330 331.1 Trends of RBC Ratio important that they seek innovation not only
320 310.5 325.2 in product development but also in business
310 320.3 317.6 management so as to improve their bottom line.
320.1 Developing methods of financial underwriting can
315.6 298.5 be a good way to enhance business results.
310.4
305.7 When it comes to growth strategy, exploring new
300 303.9 286.2 302.1 business opportunities abroad will be critical as the
290
286.7 291.8 299.5 292.3 291.9
280 289.8 283.3 277.7
283.3 278.2
285.5
270 273.7 278.4 268.5 domestic market is becoming highly saturated.
Korean Re also sets its sights on the global market.
260 271.2 264.9 265.4
250 261.1 253.1 The key to our sustained growth lies in increasing
264.3 256.3 access to overseas markets and developing new
business opportunities. We are making diverse efforts
250.9
240
12. 06 12. 09 12. 12 13. 06 13. 09 13. 12 14. 03 14. 06 14. 09 14. 12 15. 03 15. 06
to strengthen our presences globally. Establishing a
special purpose syndicate at Lloyd’s is one of the most
Life insurers Average Non-life insurers
Source: Financial Supervisory Service important initiatives that we have taken. It will enable
Korean Re to develop a track record at the Lloyd’s
market, setting the stage for global business growth.
We are also seeking to open a branch in Shanghai to tap into
Changes in insurance business environment growth opportunities in the emerging markets.
New normal Forging new partnerships and establishing new branch
Slowing economic growth, ageing population and tightening offices will be an efficient way for us to gain access to new
regulations are becoming the new normal for the Korean markets and build expertise in terms of local marketing and
insurance industry. Industrial output and consumer spending service management. In doing so, we will build a highly-
remain sluggish amid falling potential growth rates of the balanced business portfolio for both insurance and investment
economy. Low interest rates are putting upward pressure on operations by geography and line of business.
insurance prices, aggravating negative spreads and dampening Korean Re’s Gross Written Premiums for overseas
investment income growth. markets
Population ageing and low birth rates may pose a threat to
premium income growth, but at the same time it can push up
demand for retirement savings and healthcare services. Overseas 2011 2012 2013* 2014
938,886 1,134,370 889,902 1,195,095
Meanwhile, insurers increasingly feel pressured to
strengthen their capital position due to regulatory changes such
as the implementation of IFRS 4 Phase 2, scheduled for 2020, * FY 2013 covers nine months from April to December
and tightening RBC regulations. Stronger business conduct Considering our geographical location, Asia is obviously our
regulations are intensifying competition among insurers while main market, with China, Japan and Taiwan being the tops.
enhanced consumer protection measures mean increased Especially China, as one of the world’s largest insurance
product disclosure requirements and downward pressure on markets and still growing. China takes up a lion’s share of our
expenses and commissions, leading to low profitability. Asian portfolio.
Nat CATs We are also considering the establishment of an underwriting
Another challenge is natural catastrophe. They are increasing office in Dubai. With a local underwriting platform, we will
both in frequency and intensity across the world, and there is be able to better serve our clients in the Middle East for future
growing evidence that the upward trend is closely associated growth there. It is a must for us to set up new underwriting
with global warming and climate change. As a result, a wide offices in other parts of the world that strategically fit our
range of extreme and unusual weather events are taking place business growth.
worldwide. The growing risk of catastrophic weather, with Asia Prospects for Korean insurance market
bearing the brunt of the global trend, compels the insurance The Korean insurance market has achieved remarkable growth
industry to tackle the challenge of climate change in a more over the past decades and it now ranks eighth in the world in
proactive and preemptive manner than ever before because terms of premium income and fourth in terms of insurance
insurance companies are one of the biggest stakeholders that penetration. However, such a rapid growth is no longer likely
might be affected by the climate risk in either good or bad ways. due to unfavorable economic conditions including sluggish
domestic economy and global financial market instability.
(Re)insurers need to develop new products and readjust
their existing product structure in response to growing and Still, there are emerging trends that may present new growth
varying demands for climate risk management. More and more opportunities for Korean insurers. First of all, climate change
individuals and businesses want to rely on insurance to transfer is likely to create new demand for protection against natural
risks related to climate change and be indemnified for losses disasters. Secondly, the demand for financial and insurance
arising directly or indirectly from climate events. As the level products related to healthcare and retirement income is growing
and nature of weather risks vary from region to region, it is as Korea is one of the most rapidly ageing countries among the
important for insurance companies to develop products that are OECD members. Lastly, Korean insurers need to actively seek
tailored to the specific needs and circumstances of the market new business in the overseas markets as fast-growing emerging
and the region it serves.
markets offer lots of growth opportunities.
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