Seoul: South Korea’s financial regulator has announced plans to ease capital adequacy requirements for insurance companies, aiming to alleviate their financial burdens and enhance the quality of their capital base. The Financial Services Commission (FSC) revealed that it intends to finalize the necessary procedures to amend the relevant laws governing insurers’ capital adequacy ratios by the end of September.

According to Yonhap News Agency, the proposed measures will see the capital adequacy ratio under the Korean Insurance Capital Standard (K-ICS) reduced to 130 percent. Since 2001, insurance companies in South Korea have been encouraged to maintain a capital adequacy ratio above 150 percent. This ratio reflects the amount of available capital relative to required funds and is a measure of a financial firm’s soundness. Current regulations mandate that financial companies maintain this ratio above 100 percent.

In 2023, the FSC introduced the K-ICS, prompting insurers to rapidly increase their capital to meet the necessary funding requirements, subsequently driving up their financial costs. As of the end of September, the average capital adequacy ratio for insurance firms stood at 218.3 percent.

The regulator also mentioned plans to relax other regulations, including those concerning reserves against the cancellation of insurance policies, as part of its broader regulatory easing measures.