Non-life insurance companies are considering joint reinsurance to share business with reinsurers as the Bank of Korea lowered interest rates for the second consecutive month in November 2024.
Interest rate cuts worsen various financial soundness ratios of insurers. Another factor affecting solvency ratios is the introduction of IFRS17, reported Maeil Business.
Joint reinsurance contracts, introduced in Korea in 2020, are long-term agreements, with life insurers being ahead of their non-life counterparts to adopt such arrangements.
However, due to the difficulty of predicting interest rates and the requirements of new accounting standards which affect how financial statements are drawn up, non-life insurers have also begun to consider subscribing to joint reinsurance to improve their financial position.
Insurance industry news on 28 November indicated that Hanwha Insurance was considering signing a joint reinsurance contract with domestic and foreign reinsurers. If the contract is signed, it will be the first joint reinsurance arrangement for non-life insurers.
Currently, the total amount of joint reinsurance contracts in Korea is more than KRW2tn ($1.4bn). Korea Re, a domestic reinsurer, has the largest share of KRW1.48tn.
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