Both life and non-life insurers to see regulations relaxed for running overseas operations
Gov. Choi Soo-hyun of the Financial Supervisory Service(FSS) participates in a meeting of heads of 20 life and
non-life insurance firms in Korea on May 31 at the Korea Federation of Banks building in Seoul to explain FSS
plans to relax regulations on the insurance industry.(Photo on courtesy of FSS)
Gov. Choi Soo-hyun of Financial Supervisory Service (FSS), at a meeting on May 31 with heads of 20 life and non-life insurance firms, said the FSS will relax the regulations on asset management in the areas of investments in foreign bonds, replacement investments, in a bid to give the insurance firms more leeway in managing their assets to increase profits. The meeting took place at the Korea Federation of Banks building in downtown Seoul.
The FSS will suspend the evaluation of insurance firms operating overseas for a certain length of their operation periods to support their moves to diversify their earnings sources, the FSS said.
The FSS will bring down the liquidity ratio from more than 400 percent for the first-class insurance firms to 250 percent when examining their operations, which will enable the insurance firms to diversify their investment areas to boost their earnings.
The FSS will also ease the standards on foreign bond yield rate risk management when calculating the RBC of insurance firms. Up until now, the insurance firms got their reduced risk management approved only when the foreign exchange risk was suspended, but the approval will continue to be given when it is suspended for more than a year under the relaxed regulations, the FSS said.
The FSS will also try to ease the terms for investments in foreign securities to allow investments when non-financial companies with A- credit ratings provide guarantees, pending approval from the Financial Services Commission.
The current regulation stipulates that investments in foreign securities with non-investment grades were possible when financial companies with higher than BBB- credit ratings provided guarantees.
The FSS has also decided to exempt the requirement for a foreign exchange hedge when investing in overseas subsidiaries as a means to boost the firms’ profitability.
The financial authority will go as far as enabling the insurance firms to expand the policy-natured insurance products, such as insurance for fire prevention, and give more leeway in operation to the insurance firms in the development of such products in connection with luring foreign patients to hospitals in Korea.
The insurance firms will also be allowed to permit the insurance policy holders to change their insurance policies or give them new guarantees in their insurance policies as well as provide additional services in connection with the insurance products connected with health.
The FSS has also decided to separate the results of the investigation on management improvement and violation of laws checks to cut the time for investigation. They will totally exempt the investigation on the insurance firms in excellent standings or cut the investigation periods. They will also limit the investigations to only the shortcomings of the insurance firms.
But they will be tough against the insurance firms that intentionally or maliciously harm the order of the insurance market even if they are not that big.
Gov. Choi said the insurance firms should be able to maintain their financial health at all times to be able to absorb any losses caused by the market downturn due to prolonged low interest-rate periods.
The FSS was established on Jan. 2, 1999, under the Act on the Establishment of Financial Supervisory Organizations by bringing together four supervisory bodies — the Banking Supervisory Authority, Securities Supervisory Board, Insurance Supervisory Board, and Non-bank Supervisory Authority — into a single supervisory organization.
The primary function of the FSS is the examination and supervision of financial institutions, but can extend to other oversight and enforcement functions as charged by the Financial Services Commission (the former Financial Supervisory Commission) and the Securities and Futures Comm- ission.