Business · Economy · 16 hrs ago
A 1-point rate rise could cut South Korean life insurers’ capital by 7.8 trillion won
A 1-percentage-point rate rise could weaken South Korean life insurers’ capital, according to an analysis by the Insurance Research Institute.
The analysis covered 21 life insurers, excluding Samsung Life, and compared the effects of the same rate shock at two points in time.
The projected fall in their available capital rose from 1.3 trillion won in June last year to 7.8 trillion won in June this year.
Their basic capital ratio, a measure of their ability to absorb losses, is estimated to fall from 81.3% to 62.9% under that shock.
Nine insurers could fall below the 50% regulatory threshold, up from seven, when the rule takes effect next year.
Rate rises also reduce the value of insurers’ bonds, while the offsetting benefit of lower-valued insurance liabilities has weakened; the institute says insurers should set rate-risk limits and regulators should check vulnerable firms’ capital plans.
A 1-percentage-point rate rise could reduce the available capital of 21 South Korean life insurers by 7.8 trillion won, an Insurance Research Institute analysis found.
The estimated reduction was 1.3 trillion won a year earlier, making the projected impact six times larger.
The insurers’ basic capital ratio is estimated to fall from 81.3% to 62.9% under the rate-rise scenario.
The number of insurers whose ratio would fall below the regulatory threshold of 50% would increase from seven to nine.
The institute said weaker reductions in insurance liabilities have made rising rates more damaging to insurers’ capital strength.
- Who
- 21 South Korean life insurers, excluding Samsung Life, are covered by the analysis.
- What
- An Insurance Research Institute scenario estimates that a 1-percentage-point rate rise could reduce their available capital by 7.8 trillion won.
- When
- The analysis was published on November 8, 2026, using figures as of the end of June 2026.
- Where
- South Korea.
- Why
- The article says the reduction in insurance liabilities from rising rates has weakened, increasing the negative effect on capital strength.
This story does not have two clearly opposing sides.
The estimated capital reduction under a 1-percentage-point rate rise was 1.3 trillion won.
The estimated reduction had risen to 7.8 trillion won, while the basic capital ratio stood at 81.3%.
The Insurance Research Institute published its analysis of the 1-percentage-point rate-rise scenario.
- Rate-rise scenario
- 1 percentage point
- Estimated capital reduction
- 7.8 trillion won
- Insurers covered
- 21, excluding Samsung Life
- Basic capital ratio
- 81.3% currently; 62.9% under the scenario
- Below 50% threshold
- Nine insurers under the scenario, up from seven
What people are saying
Life insurers need to set interest-rate risk limits based on their basic capital ratio
Financial authorities should examine whether vulnerable insurers can carry out their capital improvement plans in response to interest-rate shocks