The Financial Supervisory Service said on the 12th that it held an emergency meeting with the insurance industry to discuss measures for managing financial soundness and responding to risks in preparation for potential increased market volatility due to recent instability in the Middle East.
The Financial Supervisory Service (FSS) held an emergency meeting at the Life Insurance Education and Culture Center in Seoul on the afternoon of the 12th, chaired by Vice Governor for Insurance Park Ji-seon, with chief financial officers (CFOs) from 14 domestic insurance companies and officials from the insurance associations in attendance.
In opening remarks, Vice Governor Park emphasized that, given the asset management characteristics of the insurance business, it can be sensitive to market volatility. The explanation was that about 70% of insurers' total assets are invested in marketable securities, leaving them highly exposed to changes in bonds, revenue securities, and other financial markets.
In particular, the Financial Supervisory Service (FSS) asked insurers to take a conservative approach to cyclical asset exposures such as overseas private debt and overseas real estate, and to conduct scenario analyses of combined crises that simultaneously consider economic variables—interest rates, stock prices, and exchange rates—and insurance risk. It also called for stronger validation of actuarial assumptions at the product design stage and measures to prevent market-disrupting practices such as excessive commission competition.
The meeting also discussed ways to minimize gaps in insurance coverage for Korean corporations and ships in the Middle East. According to the insurance industry, for domestic ships currently anchored in the Persian Gulf inside the Strait of Hormuz, existing marine insurance policies are being canceled due to the regional situation and replaced with new contracts that reflect the risks.
On this, the Financial Supervisory Service (FSS) said it would prepare the necessary measures to prevent liquidity problems at insurers due to settlement delays between domestic insurers and overseas reinsurers in the event of a major accident.
Insurers also said they would strengthen financial support, including prompt claims payments and the operation of emergency consultation channels, to minimize damage to Korean corporations operating in the Middle East and to citizens staying there.
An official at the Financial Supervisory Service (FSS) said, "We will closely monitor the impact of Middle East-driven risks on financial markets and respond preemptively at the stage before problems arise to maintain the stability of the insurance industry."