Seoul: Capital adequacy requirements for insurance companies in South Korea have been eased to help lessen their burdens and raise the quality of their capital base, the financial regulator said Wednesday. The Financial Services Commission announced that the capital adequacy ratio under the Korean Insurance Capital Standard (K-ICS) has been lowered to 130 percent from 150 percent. This change marks the first reduction since the ratio's introduction in 2001.
According to Yonhap News Agency, the capital adequacy ratio is a measure of available capital compared with required funds, indicating a financial firm's soundness. Insurance companies in South Korea are required to maintain the ratio above 100 percent under relevant regulations, although they had been advised to keep it over 150 percent.
In 2023, the K-ICS was introduced, prompting insurers to quickly raise capital to meet required funds, which increased their financial costs. Despite this, the average capital adequacy ratio of insurance firms stood at 218.3 percent as of the end of September.
The regulator also mentioned that other regulations, such as reserves against cancellations of insurance policies, have been eased. This move is part of the broader effort to alleviate financial pressures on insurance companies in the country.