HONG KONG, Feb 27 (Bernama-BUSINESS WIRE) — A regulatory change in South Korea permitting co-insurance to be used as a type of reinsurance arrangement may unlock opportunities and alternative capital sources for insurers, while reinsurers may benefit from greater business opportunities, according to a new AM Best report.
Previously, only risk premiums may be ceded to reinsurers under the Insurance Business Act. The change in regulation now allows for risk transfers associated with other types of risks, such as risks from future interest rate changes and policy cancellations, both of which stem from savings premiums under South Korean regulatory definitions. The new Best’s Commentary, titled, “South Korea Regulation Change Brings Solvency Solution to Primary Insurers and Opportunities to Reinsurance Market,” states that with the new amendment, a new source of capital may help to provide solvency relief for life and non-life primary insurers with large interest rate risk exposures as they prepare for the upcoming implementations of both IFRS 17 accounting standards, and a more stringent risk-based capital (RBC) regime — the Korea Insurance Capital Standard — and likely will translate into a positive for primary insurers’ credit profiles.