Chairman Kim Yong-duk of the Korea Non-Life Insurance Association. (Photo: KNIA)

South Korea is the world’s seventh largest insurance market, worth an estimated $14 billion in non-life and $34 billion for life insurance, second only to China in Asia. If the FTA with is ratified, domestic insurers can expect a considerable increase in their previously minor stake in the South Korean market. 

Of the $6.8 billion U.S. insurance exports in 2005, only $74 million reached the South Korean market. In light of the FTA, however, the U.S. International Trade Commission (ITC) reports that U.S. insurance exports to South Korea in the non-life market alone could reach $5 billion. Up to now, South Korean insurers held 90% of the country’s life insurance market, and approximately 99% of the non-life insurance market.

The non-life insurance market can expect similar benefits. That market covers marine, aviation, and transit insurance; reinsurance and retrocession; services auxiliary to insurance services such as risk assessment, actuarial services and claims adjustment; and brokers and other intermediaries.

As noted by the ITC in its analysis of the deal, “financial services firms in general, and the insurance industry in particular, would likely be strong beneficiaries of the proposed new investment rules. … Financial services companies have faced restrictions in Korea on their ability to invest their operating funds and to offer new products and services, and foreign firms have been treated differently from Korean-based firms, with local companies permitted to provide certain services that foreign-owned companies could not provide.”

Korea’s Non Life Insurance: Number of Agents

The report “Non-Life Insurance in South Korea, Key Trends and Opportunities to 2018,” offers a detailed analysis of the key categories in South Korea's non-life insurance segment, along with market forecasts until 2018. In terms of gross written premium, the South Korean non-life segment grew from 22.7 trillion won ($17.8 billion) in 2009 to 31.1 trillion won in 2013, at a compound annual growth rate of 8.1% during the review period (2009-2013). The strong performance of the property and liability categories - which posted respective CAGRs of 12.5% and 18.1% - supported the segment's growth.

Rising automobiles sales and growing disposable income were among the segment's other key drivers and are anticipated to remain so over the forecast period (2013-2018). The segment's gross written premium is therefore projected to post a forecast-period CAGR of 6.0% to reach 41.5 trillion won in 2018.

Key highlights cover by "Non-Life Insurance in South Korea, Key Trends and Opportunities to 2018" report includes: In terms of gross written premium, the South Korean non-life segment grew at CAGR of 8.1% during the review period; The strong performance of the property and liability categories supported the segment's growth; Rising automobiles sales and growing disposable income were among the segment's other key drivers and are anticipated to remain so over the forecast period; Due to rising demand for mortgage loans the South Korean property market faced a slowdown during the review period; Unlike life insurance, the non-life segment is less profitable due to the high reliance of insurers on traditional distribution channels such as agencies, rather than more cost-effective channels such as direct marketing, e-commerce and bancassurance.