South Korea’s financial authorities have decided to authorise new reinsurers in a move that could challenge the dominance of Korean Re, according to Business Korea.
The Financial Supervisory Commission (FSC) announced that it would lower the barriers of entry to Korea’s reinsurance market in order to encourage new players and revitalise competition.
“We will prepare an amendment to the law on the insurance business in the first half of this year and push for its enactment in the second half of the year,” the FSC said in a statement.
Business Korea observed that there is currently almost no price competition among domestic non-life insurers in South Korea, who all use the same insurance premium rates provided by reinsurance companies or the Korea Insurance Development Institute.
The incorporation of further reinsurers is expected to stimulate price competition by pushing non-life insurers to improve their capacity to assess corporate risks.
Until then, insurers will continue to calculate premiums based on their own underwriting experience and statistics, as well as the premium rates provided by the Korea Insurance Development Institute.
“Insurers that have accumulated statistics and experience in risk assessment and contract acquisition will be given an incentive to lower their premiums,” said an FSC official. “First of all, we are considering adding items to the assessment of the management of non-life insurers by the FSC as an incentive.”