Risk base of insurers falls, although all exceed minimum

The financial soundness of Korea’s insurers weakened as their average risk-based capital (RBC) ratio fell below the 300 percent level as of the end of June, amid historic-low interest rates in the country, the Financial Supervisory Service (FSS) said.

In a quarterly report released Wednesday, the financial regulatory body said the key reading - to measure the minimum amount of capital required for each insurer to support its overall businesses in consideration of various risks - fell to 278.2 percent for 56 insurance companies on average in the second quarter, from 302.1 percent in the first quarter.

Twenty-five life insurance firms lost 28.2 percent points in the ratio to 291.9 percent, while indemnity insurers dropped 14.5 percent points to 250.9 percent.

However, the FSS said all insurers surpassed the 100 percent minimum requirement under law.

Korean insurers have struggled with protracted low rate cuts, as many sold fixed-rate, long-term-guaranteed products just before the 1997 Asian financial crisis.