HONG KONG, May 28 (Bernama-BUSINESS WIRE) — AM Best hasrevised its market segment outlook to negative from stable on South Korea’s insurance industry’s non-life insurance sector. Key factors underpinning the revised outlook include the sector’s deteriorated loss ratios in major business lines, escalated pressure on investment earnings amid a historic low interest rate environment and increased asset risk due to capital market volatility.
A new Best’s Market Segment Report, titled, “Market Segment Outlook: South Korea, Non-Life,” states that South Korea’s non-life insurance segment went through a difficult year in 2019, particularly in terms of underwriting performance. Despite a 4.8% growth in gross premium written (GPW), overall industry net profit declined by 39.9% year on year, which followed a 20% decrease in 2018. The main cause of the poor results was the increased loss ratio for the automobile insurance segment and worse-than-expected profitability in the long-term insurance line. Since the outbreak of COVID-19, South Korea’s government has introduced various economic stimulus measures, including a sharp base interest rate cut of 50 basis points to 0.75% in March, the lowest level in the country’s history. Although the stock market has partially recovered from bottoming out in mid-March, it has not fully recovered to pre-pandemic levels.