S&P: Korean P/C Outlook Stable

July 5, 2007

“The outlook on rated Korean non-life insurers remains stable,” says a report from Standard & Poor’s Rating Services, “reflecting the expectation that underwriting performance may gradually improve despite intensifying competition.”

The overall Korean P/C sector should benefit over the next few years from a better loss ration in auto insurance. The poor loss ratios in the sector have had an adverse effect on underwriting in other lines. But S&P indicated that with the results are expected to improve as auto insurance premiums rise, while underwriting strengthens and changes in regulations take effect.

“Concerns remain over continuing price competition, its effect on long-term insurance lines, and the deregulation of distribution channels,” S&P continued. “The full opening of bancassurance and regulatory changes allowing solicitors to cross-sell both non-life and life insurance products may pose challenges to non-life insurers’ operations.”

Korea currently has 25 P/C companies, 15 of which are domestic. “The market is quite concentrated with the four largest domestic companies capturing about 70 percent of direct premiums in the market. The sector’s direct premium growth in fiscal year 2007 (ending March 31, 2008) is likely to drop minimally by one or two percentage points from the 11 percent growth rate in fiscal 2006 because of slowing growth in both long-term and commercial insurance lines.”

In the life sector, S&P forecasts improvements due mainly to “improving overall capitalization levels, but slowing premium growth.” Korea’s life insurers are also no allowed to list their shares on the Korean stock market, but S&P said it is “unclear which insurers will decide to go public.”

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