AM Best has maintained a stable outlook for South Korea’s non-life insurance sector, citing moderate industry growth driven by long-term business as insurers focus on securing stable future profits under IFRS 17 accounting standards.
The global ratings agency noted that new regulations are encouraging insurers to enhance profitability despite growing competition, supported by stable underwriting results in auto and general insurance.
Challenges include slower growth in auto insurance due to recent rate cuts and sluggish growth in motor vehicle registrations, as well as stricter solvency regulations requiring insurers to refine their capital and business strategies.
In 2023, the non-life insurance industry recorded a 3.7% year-over-year increase in direct premiums written, driven by 3.5% growth in long-term business and high single-digit growth in the general insurance segment.
Seokjae Lee, financial analyst at AM Best, explained, “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.”
Following the implementation of IFRS 17 in 2023, non-life insurers prioritised managing long-term insurance portfolios, expecting large future profits from this line of business. This shift has intensified competition among non-life insurers in launching new long-term products with high margins under IFRS 17, especially in areas like senior care, child care, and insurance with no (or low) lapse payments.
Chanyoung Lee, director at AM Best, commented, “We expect South Korea’s non-life segment 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.”
Lee added, “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.”
Additionally, AM Best observed that South Korea’s non-life insurers have maintained stable loss ratios and underwriting profits in the auto line in recent years. This performance is partly due to reduced claims frequency during the COVID-19 pandemic, which contributed to lower premium rates in 2022 and 2023.
