South Korea insurers to cope with new accounting, solvency rules

KUALA LUMPUR, Aug 27 -- South Korea’s non-life insurers are in a better position than their life counterparts to face the impact of simultaneous implementation of two new frameworks by 2022, according to AM Best.

The frameworks are the International Financial Reporting Standards 17 (IFRS 17) accounting standard and K-Insurance Capital Standard (K-ICS) solvency regime.

In a new Best’s Special Report, titled ‘South Korea Insurers Prepare to Face New Accounting and Solvency Rules’, AM Best stated that the implementation was likely to take a heavy operational toll on the market.

IFRS 17 will fundamentally change the accounting view on the valuation of insurance contracts and profit recognition.

In addition to the full adoption of IFRS 17, the Financial Supervisory Services also intend to have the industry simultaneously adopt K-ICS, a new solvency regime.

The aim is not only to align current solvency requirements with the new accounting standard, but also to adopt a more advanced yardstick to regulate the financial soundness of South Korea’s insurance industry.

According to the report, one of the unique features of South Korea’s non-life insurance market is that they can sell long-term insurance products, and as a result, their business largely overlaps with that of life insurers.

Despite potential financial burdens that may stem from the preparation to implement IFRS 17 and K-ICS, AM Best believes that overall, insurance customers will benefit from the enhanced financial soundness of the overall insurance industry over the long term.

More details on www.ambest.com

-- BERNAMA