Friday, April 20, 2018

Korean firms must raise capital reserves by year end

Korean insurers will be required to gradually hike their capital reserves starting this year-end, the financial regulator announced.

It is the most recent move by the insurance watchdog to better equip local insurers ahead of the changes in global accounting rules.

Starting January 2021, Korea and more than one hundred other countries will adopt International Financial Reporting Standards 17.

Once in place, Korean insurers are expected to face capitalisation pressure since the new accounting standards will require them to report liabilities on a market value, instead of book value of insurance policies.

This means that insurers need to increase their capital reserves.

To help achieve this, the Financial Services Commission said it will slowly trim down discount rates for insurance liabilities by 2019.

It will also acknowledge 90% of the newly added capital this year as risk-based capital that shows an insurer’s ability to pay policyholders.


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