Capital adequacy ratio of insurance firms further deteriorates in Q2

The capital adequacy ratio of insurance companies in South Korea fell from three months earlier in the second quarter, data showed Thursday.

The average capital adequacy ratio of domestic insurance firms had come to 217.3 percent as of end-June, down 6.3 percentage points from three months earlier, according to the data from the Financial Supervisory Service.

The ratio refers to the amount of available capital compared with required funds under the Korean Insurance Capital Standard (K-ICS).

The drop follows an 8.6 percentage point on-quarter decline in the January-March period.

The decrease in the second quarter was partly attributed to a rise in required capital due to growing sales of insurance plans and “risks” stemming from declining interest rates.

Required capital under K-ICS had increased by 2.6 trillion won (US$1.9 billion) from three months earlier to 119.8 trillion won as of end-June, according to the financial regulator.

“In particular, life/long-term insurance risk grew 1.3 trillion won fro
m three months earlier based on expanded sales of insurance plans. Also, market risk quarterly increased 1.5 trillion won as declining market interest rates led to the expansion of interest rate risk,” it said in a press release.

The capital adequacy ratio for life insurers had stood at 212.6 percent as of end-June, down 10.3 percentage points from three months earlier, while that for nonlife insurance companies slipped 0.8 percentage point to 223.9 percent over the cited period.

Source: Yonhap News Agency