South Korea’s non-life insurance industry is under capital pressure as insurance liabilities continue to grow. Although moderate growth is expected over the next 12 months, insurers will need to focus more on profitability management for long-term policies, according to a June 3, 2025 report by AM Best, which maintained a stable outlook for the sector.
Regulatory Changes and Solvency Standards
The improvement of China’s domestic solvency standards has helped strengthen capital management for Korean insurers. Meanwhile, the Financial Supervisory Service (FSS) in South Korea is pushing for more realistic actuarial assumptions. The FSS plans to cut the discount rate in stages until 2027.
These changes, combined with falling interest rates, are likely to put a considerable burden on insurers’ solvency. “However,” said Seokjae Lee, Senior Financial Analyst at AM Best, “we expect these reforms to drive insurers toward economic value-based capital management. This should help maintain a healthy capital adequacy ratio across the industry.”
Challenges in Auto Insurance
AM Best also highlighted slow growth and weaker underwriting profits in South Korea’s auto insurance sector. Recent years have seen slowed premium growth because of fewer new vehicle registrations and cumulative rate cuts aimed at supporting the broader economy.
At the same time, market concentration among large insurers is rising. According to Chanyoung Lee, Director at AM Best, “Large insurers are more likely to sustain premium growth. They benefit from economies of scale, strong marketing capabilities, and robust digital infrastructure—especially as the online auto insurance market grows rapidly.”
In summary, while South Korea’s non-life insurance industry remains stable, it faces pressures from rising liabilities, regulatory shifts, and challenges in auto insurance. Insurers will need to adapt their capital management and underwriting strategies to navigate these headwinds.
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