April 20, 2024

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[THE INVESTOR] Hanwha Life Insurance is most exposed to risks from rising interest rates, Financial Supervisory Service’s test results show.

The results showed that interest rates would have a bigger impact on insurance companies than banks and securities companies due to their large bonds portfolio. 

Among local insurers, Hanwha Life, along with Hanwha General Insurance, Heungkuk Life and Heungkuk Fire & Marine Insurance are the most exposed.

According to the analysis, Hanwha Life would see the value of its liquid assets drop by about 4 trillion won (US$3.34 billion) from the current 58 trillion won if interest rates rise by 1 percentage point. The value of Hanwha Life’s bonds have already fallen 1.3 trillion won compared to the end of September, when the yield on 3-, 5- and 10-year Treasurys were on average 60 basis points higher.

The FSS test shows that should Hanwha Life’s liquid assets devalue by 4 trillion won, the company’s risk-based capital requirement ratio would drop by as much as 130 percentage points. Hanwha Life’s RBC ratio stood at 289.8 percent at the end of September, and the FSS recommends that insurance companies maintain ratios at above 150 percent.

By Choi He-suk (cheesuk@heraldcorp.com)