As Japan's largest life insurance company is expected to log valuation gains worth several trillion won from its investment in the U.S. space company SpaceX, voices of regret are rising in Korea's insurance industry. While Japanese insurers moved early into venture investment, critics say Korean insurers have remained focused on bond-heavy portfolios and missed out on the fruits of growth by innovative corporations.
According to the insurance industry on the 28th, Nippon Life Insurance is known to have invested in SpaceX through venture capital (VC) funds for more than 10 years. Back then, the space industry did not draw attention as a promising investment destination as it does now, but after SpaceX recently went public, the value of the fund's equity holdings surged. The valuation gains Nippon Life is expected to realize are said to reach up to 500 billion yen (about 4.7634 trillion won).
Behind Japanese insurers' ability to invest in innovative corporations like SpaceX is a firmly rooted culture of active alternative investment. As the ultra-low interest rate environment dragged on, they steadily increased the share of venture and private equity (PE) investments, and identified opportunities by setting up in-house VCs and committing to overseas VC funds. Overseas investment became even more active after the abolition of foreign currency asset investment limits in 2012.
By contrast, it is hard to find cases in which Korean insurers made early investments in global unicorn corporations like SpaceX and booked large returns. Korean insurers have also committed to venture funds and invested in startups, but many of those focused on affiliated funds or on core business–adjacent areas such as Insurtech (insurance technology) and healthcare. There were overseas VC investments, but they were not large, and it was rare for them to lead to early investments in global innovative corporations like SpaceX.
Korean insurers have long maintained a stable, bond-centered management strategy. According to the Financial Services Commission, as of the end of last year, the industry's total managed asset stood at 1,292 trillion won, with bonds making up the largest share at 42.6%. Stocks account for about 9.5%, and much of that is invested in large-cap blue chips. That is why early investments in unlisted innovative corporations are rare.
Alternative investments have also been concentrated in stable asset such as real estate, social overhead capital, and infrastructure. The Korea Insurance Research Institute estimates Korean insurers' alternative investments at about 13% of managed assets. Although VC and PE are included in alternative investments, industry observers say Korean insurers' funds are largely concentrated in real estate and infrastructure, leaving a relatively low share for investments in innovative corporations.
There are institutional constraints as well. The new capital regime introduced in 2023, K-ICS, applies a 49% risk factor to unlisted stocks. That is higher than listed shares (35%), so the more insurers increase the share of unlisted investments, the more their capital adequacy ratio (K-ICS ratio) can fall. The financial authorities recently proposed lowering the risk factor from 49% to 35% for eligible venture investments to encourage insurers to invest in ventures, but many still say the burden for unlisted investments remains significant.
Some also argue that premiums insurers receive from customers must be managed conservatively because they must be paid back someday. An insurance industry official said, "Because insurers manage customer asset, they have ensured stability and have run portfolios conservatively for years," adding, "That said, as market conditions are changing, it is time to consider diversifying investments within the bounds of managing risks."