Gov. Yoon Suk-heum of the Financial Supervisory Service(FSS) delivers a speech at the 2019 APRIA Seoul Conference held at Konkuk University in Seoul on Aug. 29. (Photo: FSS)

Gov. Yoon Suk-heun of the Financial Supervisory Service (FSS) called for cooperation and tolerance in the insurance industry in his speech at the APRIA 2019 Seoul Conference on Aug. 29 at Konkuk University.

He spelled out the four major tasks for the insurance industry, including the trust of consumers, strengthening the function of social guarantees thru comprehensive finance, the exploration of new financial markets on the base of reform finance, and strengthening internal management for risk control.

He also called for everyone to take the customers’ point of view, breaking away from the supplier centered paradigm, pointing out that the initiative for the creation of new value and reform are the elements that make the insurance firms competitive no longer the market shares.

The FSS governor also hoped that the insurance firms would no longer regard internal control as expenses and look at it as a base for growth.

“Many of you attended the APRIA Annual Conference in Singapore this past August. This meeting was a joint effort between the Insurance Risk and Finance Research Centre (IRFRC) & APRIA, with the theme of ‘A New Risk Management Industry in the Making,’” said President Tim Query of Asia-Pacific Risk and Insurance Association in letter issued before the Seoul Apria Conference.

The plenary speakers and concurrent sessions offered numerous opportunities to learn and to share information.
The general focus for 2018-2019 is to build strength through community. Over the last few years, there has been a greater diversity of experience and expertise among presenters and meeting attendees than ever before.

I feel this is a strength of APRIA, and by increasing our knowledge pool across disciplines, schools, and borders, we can benefit from and expand upon what others have already discovered, President Query.

The Financial Supervisory Service (FSS) said Sept. 2 it will launch a comprehensive inspection this month into banks and securities firms over certain derivative products that are set to cause huge losses for investors.

They are derivatives-linked securities structured to track the performance of underlying assets such as interest rates and government-issued bond yields.

“As these products with complicated structures and possibilities of principal loss were sold by financial firms to large numbers of individual investors, we will inspect the entire process from the product design to sales, and look into the firms' internal control system,” the FSS said in a statement.

According to the FSS, a total of 822.4 billion won ($677.8 million) of derivatives-linked products have been sold to 3,654 individual investors and 188 institutional investors through banks and brokerages. Banks sold 99 percent of the products.

Of the total amount, products facing the largest losses are those that have been tied to yields on 10-year treasury bonds of Germany, as bond yields sank in recent weeks. About 126.6 billion won ($104.5 million) worth of these products were sold.

“As of Aug. 7, the entire amount of the products sold have come subject to loss,” the FSS said.

“If the current level of yield is maintained through maturity of the products, set from September through November, investors are estimated to suffer a 95 percent loss.”

The remaining 695.8 billion won is tied to the constant maturity swaps (CMS) of U.S. and British government bonds.
CMS is an interest rate swap that allows the purchaser to fix the duration of received flows on a swap. A swap is a derivative contract through which two parties exchange cash flows from two different financial instruments.

The CMS-related products are expected to suffer a 56.2 percent loss if the constant maturity swaps keep the current level, the FSS said. A total of 29 petitions on mis-selling of the products were submitted to the FSS as of Friday.

Woori and KEB Hana Bank sold the largest percentage of the derivative products, followed by KB Kookmin Bank, Yuanta Securities Korea, Mirae Asset Daewoo Securities and NH Investment & Securities.