KB Life Insurance increases its capital by 200 billion won in a bid to follow the recommendation of the financial supervisory authorities and raise its risk-based capital (RBC) ratio to 200%. Experts are welcoming the decision, saying that this will trigger the recapitalization of the domestic insurance industry.
“We’ve decided to increase our capital by approximately 200 billion won to meet the RBC guidelines of the authorities,” said a high-ranking executive of the company on February 11, adding, “Our company has a relatively high ratio of savings products and therefore we find it inevitable to carry out capital increase worth hundreds of billions of won for several years down the road.”
Initially, KB Life Insurance had been planning to improve its RBC ratio without recapitalization by taking over ING Life Insurance, but the deal foundered to drive the company into paid-in capital increase.
As of the end of the second quarter of last year, the RBC ratio of KB Life Insurance stood at 161%, which is the lowest in the domestic life insurance industry. Others had much higher percentages, e.g. Prudential at 662%, Ace at 571%, MetLife at 530%, Samsung at 428%, PCA at 422%, Lina at 404%, Allianz at 345%, AIA at 335% and Shinhan at 311%.
The authorities are advising life insurance firms in Korea to keep the RBC ratio over 200% at the least so that they can maintain capital adequacy. The minimum figure has been adjusted upward recently in view of the systemic change scheduled for this year, which is expected to bring down the ratio by 50 percentage points, and the deteriorating business conditions as of late. “It is expected that a series of life insurance providers will carry out capital increase to meet the guidelines,” said an industry insider.
At present, BNP Paribas Cardif Life Insurance (171%) and Hyundai Life Insurance (199%) are below the advised level while Heungkuk (211%), KDB (214%), Woori Aviva (219%) and Hana HSBC (243%) are slightly over the minimum percentage.