With the proposed hike in deposit insurance premium rates also drawing criticism during the National Assembly’s national audit, attention is turning to whether rate adjustments will be made. Estimates suggest that applying the rates outlined in the commissioned study would impose an additional burden of 1.5 trillion won on the insurance sector, leading insurers to seek adjustments to the increase by demanding disclosure of the basis for rate calculations and other measures.
According to financial industry sources on the 25th, a public-private joint task force (TF) involving the Financial Services Commission, the Korea Deposit Insurance Corporation, and financial industry associations is scheduled to hold its fourth meeting on the 30th. This will be the first meeting since the National Assembly’s Political Affairs Committee conducted a national audit of the Korea Deposit Insurance Corporation on the 19th.
During the national audit, the magnitude of the premium rate increase and the transparency of the calculation basis were placed under scrutiny. Yoo Dong-soo Jeong Mu-wi (Director) pointed out that the burden on the insurance sector could rise excessively based on the results of the Korea Deposit Insurance Corporation’s commissioned study. In response, Kim Seong-sik, head of the deposit insurance corporation, stated that he would gather industry opinions to find a reasonable compromise.
The deposit insurance corporation had previously announced plans to raise premium rates as a follow-up measure after the deposit protection limit was raised from 50 million won to 100 million won last year. A commissioned study by the Korean Financial Association, titled “Target Size of the Deposit Insurance Fund and Recalculation of Premium Rates,” proposed raising the current 0.15% premium rate for life insurance and non-life insurance to 0.40% and 0.50%, respectively. This represents an increase of approximately 2.7 times for life insurers and 3.3 times for non-life insurers compared to current levels. The study also proposed raising the rate for banks from 0.08% to 0.13%, for financial investment firms from 0.15% to 0.22%, and for savings banks from 0.40% to 0.54%.
If the commissioned study’s proposal is applied, the additional burden on the life insurance industry is estimated at 927.1 billion won, while that on the non-life insurance industry is estimated at 572.6 billion won. Combined, the additional burden for both sectors totals approximately 1.5 trillion won.
The insurance industry is raising concerns not only about the magnitude of the increase but also about the calculation process. While the deposit insurance corporation disclosed key contents and assumptions of the commissioned study, it has not sufficiently revealed the detailed data used in specific calculations. The industry maintains that it must be able to verify how insurers’ risk levels and financial structures were reflected in the calculation model in order to assess appropriateness and propose reasonable alternatives. Additionally, the insurance sector argues that the rate hike is unrelated to the raising of the deposit protection limit.
In particular, there are calls within the insurance industry to examine whether the commissioned study adequately reflects changes in insurers’ asset-liability structures and volatility following the introduction of new International Financial Reporting Standards (IFRS 17) and the solvency regime (K-ICS). The non-life insurance sector is also viewing as a point of contention whether potential fund burdens arising from the resolution process of Yebyeol Non-Life Insurance (formerly MG Non-Life Insurance) have been excessively reflected in rate calculations.
An industry official said, “It would be difficult for any insurer to accept an additional burden ranging from several hundred billion won to several trillion won without reasonable grounds,” adding, “We hope that discussions will take place after thoroughly verifying the relevant matters and reflecting industry opinions so that rate adjustments can be made at a reasonable level.”
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