The financial authorities will establish a 'bridge insurance company' to reorganize MG Non-Life Insurance. The temporary insurance company, known as the bridge insurance company, will manage MG Non-Life's insurance contracts and help finalize the transfer of contracts to large non-life insurance companies.
According to the financial sector on the 12th, the Financial Services Commission will table the agenda for a partial business suspension of MG Non-Life Insurance and the approval of the bridge insurance company at the regular meeting on the 14th. A senior official from the financial authorities noted, "Plans for the establishment of the bridge insurance company and the reorganization of MG Non-Life Insurance will be discussed at this regular meeting," and added, "A conclusion is expected to be reached this month."
The bridge insurance company refers to a temporary insurance company operated on a time-limited basis by the Deposit Insurance Corporation to reorganize distressed insurance companies. During the savings bank crisis, the corporation established a bridge savings bank by receiving the assets and liabilities of troubled savings banks, subsequently pursuing their sale and mergers. The corporation is also likely to pursue the transfer of contracts and third-party asset-liability transfers (P&A) through the bridge insurance company for MG Non-Life Insurance.
The bridge insurance company will be established with 100% funding from the corporation, and the financial authorities explained that no public funds will be injected. An official from the corporation said, "Since the establishment of the deposit insurance fund in 2003, the restructuring of financial firms comes from private finance collected in this fund, so no public funds are injected," and added, "The deposit insurance fund currently holds about 1.7 trillion won."
It is expected that the establishment of the bridge insurance company will not take a long time after approval from the financial authorities. This is the first time a bridge insurance company has been established in the country, and the previous establishment of a bridge savings bank took 1 to 2 months. The key is what happens afterward. A person from the financial authorities stated, "It is important for the transfer of contracts and the third-party sale to be carried out quickly, but it is expected to take about a year."
Once the bridge insurance company is established, new business for MG Non-Life Insurance will be halted. Most MG Non-Life Insurance policyholders are individuals, with around 1.2 million policyholders. Additionally, workforce restructuring for MG Non-Life Insurance employees seems inevitable. Lowering labor costs is necessary to increase revenue and minimize fund injections during the transfer of contracts. The MG Non-Life Insurance union stated that it will deploy all means to prevent the decision to suspend operations from being unilaterally made and is opposing the establishment of the bridge insurance company.