Thursday, May 24, 2018

Korean firms raising capital ahead of IFRS 17

To better prepare for more stringent accounting rules, some insurers in South Korea are planning to issue hybrid capital securities in their first foray into the US dollar bond market.

Among such insurers are Kyobo Life Insurance, which has tapped JP Morgan, Citigroup, Nomura, and UBS as joint bookrunners for its subordinated capital securities.

It is looking at an issue size of around US$500 million next month.

Korea is transitioning to new international accounting standards and more stringent domestic solvency rules that will require insurers to beef up their capital reserves.

The country is set to adopt the International Financial Reporting Standard (IFRS) 17 Insurance Contracts.

Under such standards, insurers will report liabilities on a mark-to-market basis rather than book value, resulting in a larger amount of recorded liabilities.

This will consequently need them to increase their reserves otherwise their equity will be overshadowed by ballooning liabilities.


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