South Korea's non-life insurance market is expected to post moderate growth over the next 12 months, mainly attributable to insurers' efforts to expand the long-term insurance line amidst heightened competition for high-margin protection-type products, according to Ms Chanyoung Lee, director, at AM Best.
She said, “The general insurance segment will continue to contribute to overall market growth, partly supported by improvement in the casualty line owing to rising demand and expansion of compulsory coverages.”
In a Best’s Market Segment Report, the global credit rating agency says that amid the modest pace of South Korea’s economic recovery, the country’s non-life insurance industry achieved a 3.7% year-over-year increase in direct premiums written in 2023, largely driven by 3.5% growth in long-term business and high single-digit growth in the general insurance line.
Underwriting results
Non-life insurers have achieved stable loss ratios and underwriting profits in their auto line over the past few years, partly attributable to reduced claims frequency during the COVID-19 pandemic, which led to lower premium rates in 2022 and 2023.
Stable rating outlook
AM Best has maintained its stable outlook on South Korea’s non-life insurance segment, noting a moderate expansion within the industry that is being driven by long-term business as non-life insurers strive to secure a stable source of future profits under IFRS 17 accounting standards.
Additional positive factors include new regulations that are driving insurers to improve profitability consistently over time despite intensified competition, in addition to stable underwriting results in auto and general insurance.
Offsetting factors include the slower expansion of auto insurance owing to recent rate cuts and sluggish growth in motor vehicle registrations, and the further strengthening of solvency regulations that have required insurers to refine both capital and business strategies.
Long-term insurance policies
“Similar to its life counterparts, a large portion of South Korean non-life insurers’ product portfolio is focused on long-term policies, mainly personal lines products such as health insurance,” said Seokjae Lee, financial analyst, AM Best.
Following South Korea’s implementation of IFRS 17 in 2023, most non-life insurers have focused on managing their long-term insurance portfolios, expecting large future profits generated from this line of business. The move resulted in increased competition among non-life insurers in launching new long-term products with high margins under IFRS 17, particularly in areas such as senior care, child care and insurance with no (or low) lapse payments.