April 17, 2024

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The financial watchdog said on April 2 it will encourage some insurers to raise more capital this year as the nation’s insurance industry prepares to adopt stricter global accounting rules.

Under the rules, dubbed the International Financial Reporting Standards 17, insurers’ liabilities will be assessed on the basis of their market value rather than book value in 2021. 

It is aimed at enabling a much “fairer” assessment of insurers’ ability to withstand stress and to have more capital bases and reserves to cover potential losses.

Lee Sang-che, deputy governor of the Financial Supervisory Service, told insurance executives at a meeting earlier in the day that the FSS will put its priority on stabilizing the insurance market by increasing its financial soundness.

“To cope with the planned implementation of the IFRS 17, the FSS will encourage some vulnerable insurers to bolster their capital reserves,” Lee told the meeting.

The new rules are expected to put a burden on some local insurers because they will need to substantially increase their capital reserves, some analysts said.

The FSS will also continue to urge insurers to make their insurance policies easier to understand and explain insurance plans in the simplest terms, Lee said.

By Ram Garikipati and newswires (ram@heraldcorp.com)