As deposit insurance premium rates are set to rise, the insurance industry has begun voicing concerns over the unexpectedly large increase, urging authorities to consider increasingly stringent prudential regulations.
According to the insurance industry on the 10th, the Life Insurance Association and the Property & Casualty Insurance Association held a meeting with the Financial Services Commission and Korea Deposit Insurance Corporation on the 3rd regarding premium rate increases. Notably, the property and casualty insurance sector expressed concerns about the proposed rate hike. During the meeting, both the Deposit Insurance Corporation and the Financial Services Commission reiterated that the rates presented in the research study are not final, yet the insurance industry remains unconvinced.
In fact, a research project commissioned by the Korea Finance Association indicated a proposal to raise property and casualty insurance premium rates from the current 0.15% to 0.50%, approximately a 3.3-fold increase. This represents the largest proposed hike among all sectors, reaching the statutory ceiling. Other sectors were also proposed for increases: life insurance from 0.15% to 0.40%, financial investment from 0.15% to 0.22%, and banks from 0.08% to 0.13%.
The current deposit insurance premium rate has remained unchanged since 2009 (for savings banks, since 2011). However, following the September increase of the deposit protection limit from 50 million won to 100 million won last year, the Deposit Insurance Corporation prepared to implement a corresponding premium hike as a follow-up measure. The new rates are expected to take effect starting in 2028 after gathering opinions from relevant sectors.
The insurance industry first conveyed its view that the burden imposed by strengthening prudential regulations on the insurance sector must be taken into account. Since the introduction of new accounting standards (IFRS17), capital adequacy regulations such as the solvency ratio (K-ICS) have been tightened, and with the more stringent basic capital K-ICS set to take effect next year, insurers face growing pressure to raise capital.
Furthermore, a significant increase in deposit insurance premiums could further burden insurance companies. If the interim research results are adopted as final, the additional annual premium burden for the entire insurance sector is estimated at approximately 750 billion to 800 billion won. This averages about 17.5 billion won per year for each of the 45th participating insurance companies. Most importantly, the insurance industry is most concerned about the impact on small and medium-sized insurers if premiums are raised.
The property and casualty insurance sector also holds a different perspective on the increase in deposit protection limits. Unlike banks and other deposit-taking institutions, the property and casualty insurance business is not directly affected by the 100th million won limit increase. Since these companies handle almost no savings-type assets like life insurers, applying the same standard to significantly raise their premium burden is considered inappropriate.
Within the property and casualty insurance industry, there is an interpretation that the Deposit Insurance Corporation's sale process involves sharing the necessary funding across the entire sector. The Deposit Insurance Corporation has currently selected OK Financial Group as the preferred negotiation partner and appears set to provide over 1 trillion won in funds through the deposit insurance fund. However, even considering this, the industry maintains that such a large increase is unacceptable. An industry representative stated, "We continue to emphasize that when determining premium rates, both sector-specific risk characteristics and capital burdens must be taken into account."
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