Global ratings agency AM Best has announced that it is maintaining its stable outlook on South Korea’s non-life insurance segment, due to improved performance of the long-term insurance line of business and greater stability in auto profitability.
In a new Best report, the agency states that long-term insurance – the largest business line in the non-life industry – maintained stable growth of approximately 4% in 2022. According to the agency, this was due to continued expansion of the recurring premium base as well as strong new business generation from health products.
Moreover, South Korea’s non-life insurance industry also posted steady and solid premium growth across all lines of business in recent years. In 2022, overall GWP growth was 4.7%, a slight decrease from the previous years 4.5%.
At the same time, long-term insurance – the largest business line in the non-life industry – maintained stable growth of around 4% in 2022, of the back of continued expansion of the recurring premium base, and strong new business generation from long-term health products.
Meanwhile, Best noted that premium growth in the auto insurance segment was subdued at 2% in 2022, while the combined ratio saw slight 0.5-percentage-point improvement to 96.9%.
The agency expects “upward pressure” on the auto insurance segment’s combined ratio following the post-pandemic rebound in claims frequency and the rise in vehicle repair costs and minimum wage due to inflation.
However, while Best expects that IFRS 17 is likely to bring more stability in reported financials for many South Korean insurers, given the use of active assumption sets in IFRS 17, the change in actuarial/economic assumptions with the new standard could bring widely varying impacts on reported capital and earnings.
The cumulative effects of prior rate hikes in the medical indemnity line, along with regulators’ active involvement in controlling moral hazard claims and overtreatment—in particular, cataract surgery—since the first half of 2022 has helped boost carriers’ profits,” said Chanyoung Lee, director, analytics, AM Best.
“Insurers also have been expanding sales of high-margin health products to secure their future profit base under IFRS 17, which became effective in 2023.”
