Skip Navigation

Proposed Amendment to Enforcement Decree of Korean Commercial Code Adopted at Cabinet Meeting


As reported in our previous newsletter (Link), the Ministry of Justice proposed an amendment to the Enforcement Decree of the Korean Commercial Code (the “KCC”) to allow insurance companies to offset unrealized profits and unrealized losses in order to address the issue of reduced distributable profits of insurance companies under the KCC with the implementation of the IFRS17 in 2023. The amendment has since been approved at a Cabinet Meeting on December 12, 2023, and was set to become effective by the end of 2023. With the adoption of the amendment, insurance companies will be able to distribute profits in a more stable manner, thereby benefitting shareholders and others who have invested in insurance companies in anticipation of receiving dividends. We provide more details regarding the amendment as follows:

Introduction of New Provision to Allow Offsetting of Unrealized Profits Against Unrealized Losses (Article 19 (2) 3 of the Enforcement Decree of the KCC)

  • Where an insurance company enters into insurance product transactions and the following types of hedging transactions to hedge the risks relating to their insurance products, offsetting of unrealized profits and unrealized losses generated from such transactions will be permitted:

Purchase of Government/corporate bonds and entering into derivative transactions to hedge the risk of interest rate fluctuations on insurance policies;

Reinsurance transactions to transfer risks related to existing insurance policies; and

Retirement insurance and variable insurance policies where payment under the policies vary depending on asset management performance results.

As a follow-up to the foregoing, the Ministry of Justice, together with the financial authorities and the Korea Life Insurance Association and General Insurance Association of Korea, will establish guidelines on accounting treatment and profit distribution for insurance companies.


[Korean Version]