Growing Pressure for ‘1 Trillion Won Mutual Support’
This year has seen a significant improvement in the profits of insurance companies, largely attributed to the substantial increase in insurance gains following the introduction of the new IFRS17 international accounting standard. As banks, which have made large-scale interest income this year, are preparing a mutual financial support fund of 2 trillion won (US$1.53 billion), the prospects suggest that the pressure for collaborative efforts towards insurance companies will be noteworthy as well.
According to the Financial Supervisory Service (FSS) on Dec. 4, the cumulative net profit of the insurance industry for the first nine months of this year reached 11.42 trillion won (US$8.74 billion), marking a whopping 47.2 percent increase compared to the same period last year, when it stood at 7.76 trillion won. Life insurance companies saw a 49.4 percent surge, reaching 4.4 trillion won during the same period, while non-life insurance companies experienced a 45.8 percent rise, reaching 7.02 trillion won.
The performance of the insurance industry has been boosted by the gains in insurance profits. Life insurance companies recorded 4.07 trillion won in the first nine months, marking a turnaround from the 16.75 trillion won loss during the same period last year. Non-life insurance companies also registered 7.45 trillion won, reflecting a growth of 7.93 trillion won during the same period. An official from the FSS said, “Life insurance companies saw an increase in sales of guaranteed insurance, while non-life insurance companies demonstrated solid performance in auto insurance. Changes in accounting standards also influenced the improvement in insurance profits.”
The insurance business performance showed some variation. Life insurance companies recorded 76.46 trillion won from January to September, representing a decrease of 1.23 trillion won, or 1.6 percent, compared to the same period last year. While there was a rise in income premiums from guaranteed insurance and retirement pensions, a decline in income premiums from savings insurance and variable insurance occurred due to factors such as market downturns in the stock market. In contrast, non-life insurance companies recorded 85.85 trillion won, showing an increase of 7.21 trillion won, or 9.2 percent, during the same period. This growth was driven by a uniform increase in income premiums from long-term insurance, auto insurance, and general insurance.
With a significant improvement in the profits of the insurance industry, the pressure for collaborative efforts is expected to grow. Some experts predict that the insurance industry may contribute a mutual financial support fund of around 1 trillion won, equivalent to half of the banking sector’s. Financial authorities are planning to meet with representatives of insurance companies soon to discuss mutual financial support.