1.

Rationalization of K-ICS Regulatory Standards, Including Early Redemption Requirements for Subordinated Bonds

In recognition of strengthened solvency management following the introduction of the Korea Insurance Capital Standard (the “K-ICS”) system, the K-ICS ratio thresholds, used as regulatory standards under the Insurance Business Act, have been revised downwards.
 

(1)

Early Redemption of Subordinated Bonds: Previously, insurers were subject to certain requirements* if the K-ICS ratio fell below 150% following the early redemption of subordinated bonds. Under the Proposed Amendments, these requirements are waived if the K-ICS ratio is at least 130% after redemption. If the ratio is below 130%, the condition relating to disadvantageous interest rates is eliminated.
 
* Requirements: (i) maintaining a K-ICS ratio of at least 100% after redemption, (ii) capital refinancing with strong capital characteristics, (iii) contract provisions allowing for early redemption, and (iv) significantly unfavorable interest rate terms for the relevant capital instruments.
  

(2)

Regulatory Requirements Related to Licensing: The K-ICS ratio standards* governing the licensing of new insurance products, guarantees of debts, capital reduction and subsidiary ownership have been adjusted to 130%.

* K-ICS ratio standards: (i) K-ICS ratio of at least 150% for licensing additional insurance products, (ii) K-ICS ratio of at least 200% when guaranteeing the debt of an overseas insurance subsidiary, (iii) K-ICS ratio of at least 150% following capital reduction, and (iv) K-ICS ratio of at least 150% when assuming impairment of subsidiary investment.
 

(3)

Reserve Ratio Requirement for Surrender Refunds: Previously, if an insurer’s K-ICS ratio at the end of the preceding quarter was 150% or higher (subject to a stepwise decrease by 10% annually, from 200% in 2024 to 150% in 2029), the required reserve for surrender refunds could be reduced to 80% of the original debt minus market debt. Under the revised proposal, the trigger for this reduction is set to a K-ICS ratio of 130% (final standard by 2029), with an interim standard of 170% in 2025.
 

2.

Realization of Requirements for Release of Catastrophe Reserves

Catastrophe reserves are funds set aside to address unexpected losses from general non-life insurance, such as fires and marine incidents. In response to feedback that the existing release requirements were overly restrictive, the regulations have been amended as follows:
 

(1)

Removal of Current Net Loss and Insurance Business Loss Requirements: The requirements relating to net loss and insurance business loss, previously necessary for the release of catastrophe reserves, have been eliminated. As a result, insurers may now release catastrophe reserves by insurance type when a certain loss ratio is exceeded, even if the company as a whole does not post an operating loss on its financial statements.
 

(2)

Adjustment of Reserve Accumulation Requirements: The accumulation size of catastrophe reserves will be adjusted in a more realistic manner. These changes are expected to enhance the effective utilization of the reserve system and improve insurers’ capacity to pay dividends to shareholders.
 

3.

Expansion of Business Opportunities for Microinsurance Agencies and Subsidiaries, and Establishment of Foundation for Streamlined Complaint Handling
 

(1)

Expansion of Business Scope for Simple Non-Life Insurance Agencies: The permitted activities of “micro non-life insurance agencies” have been broadened. Previously restricted to selling non-life insurance products, these agencies are now also authorized to distribute life insurance products.
 

(2)

Expansion of Permissible Business Activities for Insurance Company Subsidiaries: Subsidiaries of insurance companies may now engage in the long-term rental housing business, as defined under the Special Act on Private Rental Housing, without prior approval or reporting. This measure is expected to facilitate insurance companies’ entry into new business fields and diversify their asset and liability management (“ALM”) strategies through long-term asset management.
 

(3)

Enhancement of Complaint Processing Efficiency: The association’s authority and procedures for handling simple complaints will be explicitly specified, thereby laying the groundwork for more efficient complaint resolution processes.