Insurers wrestle with growing loan defaultsThe default rate on loans extended by Korean insurers edged up in May from a month earlier mainly due to a rise in overdue household and corporate loans, the financial regulator said yesterday.
The average ratio of overdue loans came to 0.83 percentage point of total lending by domestic life and non-life insurers, up 0.03 percentage point from the end of April, the Financial Supervisory Service (FSS) said in a report. The May figure, however, marks a 0.22 percentage point dip from a year earlier when the default rate reached 1.05 percent. Of the total, the default rate of household loans reached 0.54 percent, a gain of 0.02 percentage point from the previous month and the highest since hitting 0.67 percent in September. The reading for corporate loans rose 0.05 percentage point to 1.49 percent, which is also the highest since December when numbers reached 1.63 percent.
The FSS said the rise can be attributed to increased defaults of both household and corporate loans. It also said corporate loan default numbers for real estate project financing loans, in particular, jumped 0.25 percentage point to 6.27 percent. Arrears for small and medium-sized businesses gained 0.02 percentage point to 2.14 percent.
Local insurers, meanwhile, lent a combined 105.5 trillion won ($92.5 billion) to companies and households as of the end of May, the FSS said.
The figure represents a 1.34 trillion won, or 1.29 percent, gain from the month before, with household loans making up 73 trillion won.
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