As the high exchange rate trend (weak won) continues, the Financial Supervisory Service is tightening oversight of insurers' new overseas investments. If overseas investments are excessive when the exchange rate is high, soundness could deteriorate later when the rate falls. The Financial Supervisory Service is regularly checking the scale of increases in insurers' new overseas investments.
According to the financial authorities on the 2nd, the Financial Supervisory Service is reviewing trends in insurers' new overseas investments on a monthly and quarterly basis. The Financial Supervisory Service does not yet see the scale of new overseas investments as having crossed a threshold. However, if the won-dollar rate rises further, the lower bound under risk management standards could fall, so it is preemptively monitoring the situation.
Insurers with a high existing share of overseas investments can expect gains as the valuation of their holdings rises when the exchange rate increases. By contrast, if they expand new investments during a weak-won phase, they could face valuation losses when the exchange rate stabilizes. The rate, which was moving below 1,400 won to the dollar in August–September, surged after the Chuseok holiday, and on the 24th it climbed intraday to 1,477.3 won, a record high in seven months since Apr. 9.
Insurers whose domestic revenue is shrinking are seeking breakthroughs overseas. Samsung Fire & Marine in June signed an additional equity investment agreement of $570 million (about 838.2 billion won) with the U.K.-based global insurer Canopius, cementing its position as the second-largest shareholder. DB Insurance also acquired 100% equity in the U.S. insurer Fortegra for $1.65 billion (about 2.4257 trillion won). Hanwha Life acquired 75% equity in Velocity in Nov. last year and completed related procedures at the end of July this year.
According to the Financial Supervisory Service, life insurers' net profit in the first through third quarters of this year was 4.8031 trillion won, down 8.3% (439.1 billion won) from a year earlier. Over the same period, non-life insurers' cumulative net profit fell 19.6% (1.58 trillion won) to 6.461 trillion won.
An official at the Financial Supervisory Service said, "Insurers may see valuation gains on existing overseas investment asset, but if additional or new investments increase, it could weigh on soundness," and added, "If it appears a reference point has been exceeded, we plan to caution the insurer."