As exchange rate volatility has recently increased, the Financial Supervisory Service urgently gathered insurers, asking them to prevent misselling of dollar-denominated insurance and to refrain from excessively expanding foreign-currency investments.
On the 10th, the Financial Supervisory Service held an "exchange rate situation review meeting" presided over by Seo Young-il, assistant deputy governor in charge of insurance, with chief financial officers (CFOs) from 14 major insurance companies. The meeting was attended by major insurers and industry associations, including Samsung, Hanwha, Kyobo, Shinhan, Mirae Asset, MetLife, AIA Life and Samsung, DB, Hyundai, KB, Heungkuk Fire&Marine Insurance, Heungkuk Metaltech, and Korean Reinsurance Company.
The Financial Supervisory Service (FSS) stressed that preemptive responses by the insurance sector are needed to prepare for sharp swings in exchange rates. In particular, it said that when making new overseas investments, companies should comprehensively weigh the impact on financial soundness and cash flow, and should refrain from aggressively expanding foreign-currency investments aimed at exchange gains.
It also called for stronger oversight of currency-hedging derivatives used to reduce exchange rate risk. It pointed out that if contract maturities cluster at a specific time, the risks can grow that the exchange rate will move sharply or that extending maturities will become difficult.
It also issued a warning on alternative investments such as overseas private credit funds. If global financial markets wobble, asset values can plunge, so institutions should secure sufficient capacity to absorb potential losses.
Regarding sales of dollar-denominated insurance, it emphasized consumer protection. Although recent sales volumes have declined, the renewed rise in exchange rate volatility is raising concerns about consumer harm. The Financial Supervisory Service (FSS) urged firms to fully explain the possibility of losses due to exchange rate fluctuations so that consumers do not mistake dollar-denominated insurance for a simple "FX arbitrage product," and to strictly conduct suitability reviews for enrollment.
If market volatility widens going forward, the Financial Supervisory Service (FSS) plans to review each insurer's foreign exchange risk management, and to strengthen crisis response capabilities through checks on foreign-currency liquidity and stress tests.