Seoul: The stable outlook on South Korea’s non-life insurance segment has been maintained by AM Best, noting a continued refinement of the country’s domestic solvency standards that have helped strengthen insurers’ capital management.

According to BERNAMA News Agency, AM Best stated additional factors include moderate growth in the long-term and general insurance segments and efforts to improve profitability in the former as well as in investment strategies. However, the global credit rating agency notes an offsetting factor of slow growth prospects and weakened underwriting profitability in South Korea’s auto insurance segment.

The Best’s Market Segment Report titled ‘Market Segment Outlook: South Korea Non-Life Insurance’ indicated that the country’s non-life insurance industry is facing capital pressure with increasing insurance liabilities. This follows the Financial Supervisory Service’s (FSS) push for more realistic actuarial assumptions and a phased plan to cut discount rates until 2027, aimed at improving the credibility and comparability of insurers’ financials.

These ongoing regulatory changes, coupled with a decreasing trend in domestic interest rates, are expected to pose a considerable burden on insurers’ solvency, especially those with relatively weaker capital positions. However, AM Best anticipates these changes will promote economic value-based capital management for insurers to maintain sound capital adequacy across the industry.

Over the next 12 months, AM Best forecasts moderate growth in the industry with a heightened emphasis on profitability management of long-term insurance. This follows several years of intensified market competition and a focus on mitigating increasing solvency pressures. The report also revealed that the auto insurance segment has experienced a slowdown in its premium growth in recent years, due to sluggish vehicle registrations and cumulative premium rate cuts to support the consumer economy.