In preparation for the introduction of the IFRS, the Financial Supervisory Service (the "FSS") decided to introduce a coinsurance transaction, which allows insurance companies to cede the risk associated with the savings portion of insurance premiums (i.e., interest rate risk) to reinsurance companies, leading to more effective management of insurance liabilities′ interest rate risks. As a follow-up measure, the FSS amended the Detailed Enforcement Rules of the Insurance Business Supervisory Regulations as of June 30, 2020 to reflect the transfer of assets and liabilities under coinsurance transactions to the RBC standards.
To be more specific, when a primary insurer cedes insurance liabilities to a reinsurance company through coinsurance, the insurance liabilities corresponding to the ceding contract are deducted from the insurance liability exposure in the calculation of the RBC interest rate risk amount. In addition, with respect to the transfer of assets to a reinsurance company by a coinsurance transaction, credit risk corresponding to the credit rating of the reinsurance company will be taken into account.
This amendment takes effect from June 30, 2020.
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