The insurance sector is set to be the last among financial sectors to be allocated additional household loan capacity. As the government doubled this year's target growth rate for the total household liability, total lending capacity will increase by about 30 trillion won. The financial authorities plan to allocate an additional limit to the insurance sector after finishing allocations to other financial sectors, but the size is expected to be small.
According to the financial authorities on the 1st, the Financial Supervisory Service has not yet reached agreement with the Financial Services Commission on new loan management targets for the insurance sector. Accordingly, a specific consultation schedule with the sector has not yet been set.
In contrast, the banking sector has completed the allocation of new loan management targets for products such as mortgage loans and unsecured credit loans and notified each company. Among secondary financial sectors, the setting of company-by-company management targets has been nearly completed for mutual finance institutions, specialized credit finance companies and savings banks.
The additional limit for the insurance sector is expected to be limited. The Financial Supervisory Service analyzes that many major insurers have already exceeded their limits this year as they rapidly increased policy loan issuance, even taking into account the expanded total volume. As of the end of June this year, the outstanding loan balance of policy loans was 72.8 trillion won, up 2 trillion won from the end of December last year (70.8 trillion won).
A policy loan refers to a loan that can be taken within the scope of the surrender value. Because borrowers can obtain funds without separate income verification or a credit review, it is used when urgent living expenses are needed. With stock market volatility rising, some analysis says borrowers used policy loans for "debt-fueled investing."
Loan delinquency rates at insurers are also rising. As of the end of the first half of this year, the delinquency rate on insurance company loan receivables was 1.08%, up 0.26 percentage points in three months. The rate topped 1% for the first time in 14 years and nine months since the end of September 2011 (1.18%).
Through the June 27 measures this year, the government tightened household loans across the board by limiting not only mortgage loans but also unsecured credit loan limits to within annual income. Later, through the Aug. 13 comprehensive real estate finance measures, it raised the target growth rate for total household loans from 1.5% to 3%, securing additional lending capacity.
The aim is to meet funding needs in the dwelling supply process and demand for loans from young people and genuine end-users. However, considering the already accumulated increase in household loans, the amount that can actually be used is expected to be only 6 trillion to 8 trillion won.
An official at the Financial Supervisory Service said, "Even considering the expanded capacity, there are insurers that need total loan volume management. After allocations to other sectors are completed, we plan to allocate targets suited to each company based on conditions."