April 19, 2024

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[THE INVESTOR] South Korea’s major insurance companies are boosting their capital to prepare for new accounting rules that take effect in 2017, industry sources said on Dec. 26.

Under the International Financial Reporting Standards 4 Phase II, insurers’ liabilities will be assessed on the basis of their market value, instead of book value. It’s intended to enable a much “fairer” assessment on insurers’ ability to withstand stress and to have more capital bases and reserves to cover potential losses.

Local insurance companies are estimated to expand their capital by a combined 1.41 trillion won (US$1.17 billion) this year through rights offerings or bond sales, according to the sources.

Allianz Life Insurance Korea received a capital injection of 50 billion won from its parent Allianz Group of Germany by issuing new shares in November ahead of the conclusion of its sale to a Chinese investor.

After signing $3 million deal to take over Allianz Life Insurance Korea in April, China’s Anbang Insurance Group requested South Korea’s financial regulator in August to give the green light to the purchase.

Last month, the board of Allianz Life Insurance Korea decided on a rights offering of 187 billion won, which means the company may raise more capital down the road.

Last month, Tongyang Life Insurance decided to receive a capital injection of 625 billion won from its parent Anbang Insurance Group within this year. A Tongyang official said the capital increase may be actually carried out next year because it requires approval from South Korea’s financial regulator.

(theinvestor@heraldcorp.com)