AM Best Maintains Stable Outlook On South Korea’s Non-life Insurance Market

KUALA LUMPUR, June 27 (Bernama) -- Global credit rating agency, AM Best is maintaining its stable outlook on South Korea’s non-life insurance segment, citing improved performance of the long-term insurance line of business and greater stability in auto profitability.

In a new Best’s Market Segment Report, “Market Segment Outlook: South Korea Non-Life Insurance,” AM Best stated that long-term insurance, the largest business line in the non-life industry, maintained stable growth of approximately four per cent in 2022 due to continued expansion of the recurring premium base and strong new business generation from health products.

Its director, analytics, Chanyoung Lee said 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.

“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,” said Lee in a statement.

Premium growth in the auto insurance segment was subdued at two per cent in 2022, but the combined ratio saw slight 0.5-percentage-point improvement to 96.9 per cent.

The rating 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.

While AM 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.

-- BERNAMA