[Seoul=Newsis] Reporter Kim Hyung-seop = In the third quarter of last year, the Risk-Based Capital (K-ICS) ratio of insurance companies, after applying transitional measures, stood at 218.3%, which is an increase of 1.0 percentage point compared to the previous quarter (217.3%).
The Financial Supervisory Service announced this status of the “Insurance Company’s Solvency Ratio as of the End of September 2024” on the 14th.
The solvency ratio is an indicator used to assess the financial soundness of insurance companies, calculated by dividing available capital by required capital.
The solvency ratio for life insurance companies fell by 0.9 percentage points to 211.7%, while non-life insurance companies increased by 3.1 percentage points to 227.1% compared to the previous quarter.
The rise in the solvency ratio of insurance companies in the third quarter of last year was due to a larger decrease in available capital compared to the required capital under K-ICS after transitional measures.
Transitional measures are actions taken to gradually apply new risk assessments to ensure stable K-ICS levels, considering the potential drop in the solvency ratio after the introduction of the new K-ICS.
As of the end of September, after the transitional measures, K-ICS available capital was 258.9 trillion won, a decrease of 1.5 trillion won from the previous quarter.
Despite a 5.7 trillion won increase in retained earnings and the issuance of capital securities (such as subordinated bonds) worth 3.4 trillion won, the total comprehensive income decreased by 11.2 trillion won due to the rise in insurance liabilities resulting from a drop in stock prices and market interest rates.
The K-ICS required capital, after transitional measures, was 118.6 trillion won, a reduction of 1.2 trillion won from the previous quarter.
The risk amount for disability and disease increased by 1.9 trillion won due to expanded health insurance sales, and the interest rate risk rose by 700 billion won due to falling market interest rates. However, the overall required capital decreased as the stock risk amount dropped by 3.9 trillion won due to a decrease in exposure from falling stock prices.
The Financial Supervisory Service stated, “The solvency ratio of insurance companies after transitional measures remains at a stable level,” and added, “However, given the continued increase in financial market uncertainty, we will thoroughly supervise to ensure vulnerable insurance companies secure sufficient solvency.”