In the first quarter of this year, the insurance company's solvency margin ratio (KICS) was reported at 197.9% (after transitional measures), down 8.7 percentage points from the previous quarter (206.7%). This is the first time since the first quarter of 2021 that the insurance company's KICS has fallen below 200%. KICS is an indicator that shows whether an insurance company can promptly pay insurance claims, calculated as the available capital divided by required capital.
According to the Financial Supervisory Service on the 17th, the KICS of life insurance companies in the first quarter of this year was 190.7% after transitional measures, a decline of 12.7 percentage points from the previous quarter. During the same period, property and casualty insurance companies recorded 207.6%, down 3.4 percentage points.
When considering before the transitional measures, the overall KICS of insurance companies was 184.2%, down 7.1 percentage points from the previous quarter (191.3%). Life insurance companies showed a drop of 10.5 percentage points to 172.2%, while property and casualty insurance companies decreased by 2.3 percentage points to 200.9%.
The KICS of the 'big three' life insurance companies also fell. Samsung Life Insurance, which did not apply for transitional measures, recorded a KICS of 177.2% in the first quarter, a decline of 7.7 percentage points from the previous quarter. Hanwha Life reported a drop of 9.7 percentage points, resulting in 154.1%. Kyobo Life Insurance recorded a significant decline of 33.9 percentage points to 186.8%, the largest drop among life insurance companies. Prior to the transitional measures, it was 145.8%, down 18.4 percentage points from the previous quarter.
Among life insurance companies, only four, including KDB Life, Hana Life, ABL Life, and Cardiff Life, saw an increase in KICS. In contrast, Shinhancard Life, KB Life, IBK Pension Insurance, DB Life, Kyobo Life Planet, Tongyang Life, Fubon Hyundai Life, and Cheuvreux Life all experienced double-digit declines.
In the case of property and casualty insurance companies, only a few large insurers such as Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, and DB Insurance showed improvements in KICS. Meritz Fire & Marine Insurance recorded a decline of 9.3 percentage points but still showed solid performance at 238.9%. KB Insurance reported a decrease of 4.3 percentage points, resulting in 182.2%.
Kakao Pay Insurance saw the biggest drop, with KICS plummeting by 126.5 percentage points in just one quarter. However, it recorded 283.1%, significantly exceeding both the legal standard (100%) and the recommended guideline by financial authorities (130%). Carrot Insurance, which is scheduled to be merged with Hanwha General Insurance, recorded a sharp decline of 87.7 percentage points to 68.6%, failing to meet the legal standard.
The drop in KICS was due to the increase in required capital outpacing the increase in available capital. KICS decreases when required capital increases. Conversely, KICS rises when available capital increases. In the first quarter of this year, the insurance companies' available capital was 249.3 trillion won after transitional measures, an increase of 13 billion won from the previous quarter, but during the same period, required capital increased by 59 billion won to reach 126 trillion won.
The FSS noted, "Capital available slightly increased due to net income generation and new issuance of capital securities," and explained, "The liabilities due to the sale of long-term guarantee insurance increased by 3 trillion won, and the interest risk amount increased by 1.7 trillion won due to an expansion of asset-liability management (ALM) mismatches, resulting in an increase in required capital."
The FSS stated, "As a continued low interest rate trend is expected due to the decline in the base rate, it is necessary to continue efforts in ALM management to prepare for falling interest rates," adding, "We plan to strengthen supervision to manage risks, especially for insurance companies with insufficient ALM management."