Input from the non-life insurance industry on the cost-sharing standard for contributions to the bad bank (New Leap Fund), a debt relief program for long-term delinquents, is understood to be in the final stage. With banks, savings banks, credit card and other lenders, and the life insurance industry wrapping up talks on the contribution standard, the General Insurance Association has also been preparing to conclude within this month.
At the start of talks, some suggested using the size of New Leap Fund-eligible bond holdings as the basis for contributions. As a result, there was an outlook that Seoul Guarantee Insurance Company, which holds the majority of New Leap Fund-eligible bonds, could shoulder most of the contributions. However, in the final plan, Seoul Guarantee Insurance Company's share is expected to decrease.
According to the financial industry on the 28th, the General Insurance Association narrowed the New Leap Fund contribution-sharing plan to a single proposal the previous day and completed gathering opinions from Seoul Guarantee Insurance Company and the five major non-life insurers (Samsung Fire & Marine Insurance, DB Insurance, Hyundai Marine & Fire Insurance, KB Insurance, Meritz Fire & Marine Insurance). The contribution standard is expected to be finalized as early as this morning.
The New Leap Fund is a restart support program for long-term delinquents promoted by the Financial Services Commission and Korea Asset Management Corporation. It purchases unsecured arrears bonds of at least seven years and 50 million won or less held by financial institutions at about 5% of face value and then retires them or adjusts the debt. The New Leap Fund totals 840 billion won, funded by 400 billion won in government finances and 440 billion won in contributions from the financial sector. Of that, banks will bear about 360 billion won, life insurers and non-life insurers 20 billion won each, specialized credit finance companies 30 billion won, and savings banks 10 billion won.
Talks in the non-life sector dragged on as Seoul Guarantee Insurance Company expressed dissatisfaction with the initially discussed sharing standard. Seoul Guarantee Insurance Company holds about 90% of all New Leap Fund-eligible bonds in the non-life sector, and most non-life insurers other than Seoul Guarantee Insurance Company argued to pay contributions based on that standard. By that metric, Seoul Guarantee Insurance Company would have to pay about 90% (18 billion won) of the contributions.
Seoul Guarantee Insurance Company argued that various standards, including capacity to contribute, should be considered in addition to bond holdings, and other non-life insurers are said to have accommodated its position to some extent. An industry official said, "There was an opinion that the industry as a whole should bear contributions in the spirit of cooperating for inclusive finance."