Since the introduction of coinsurance into the domestic market in 2020, three coinsurance deals have been finalized in Korea, bringing the total volume of gross written premiums to over KRW 800 billion. Among these, Korean Re has won two mega deals, consisting of 99% of the entire premium size, more evidence that we are the undisputed leader in the domestic coinsurance market.
The implementation of IFRS 17 and K-ICS in 2023 is likely to put capital pressure on primary insurers, and their financial needs to mitigate required capital have been increasing accordingly. Indeed, major life insurers such as Samsung Life and Shinhan Life are utilizing coinsurance as an effective tool for asset-liability management (ALM), and the overall market size is expected to grow rapidly.
Even though we have successfully positioned ourselves to lead the domestic coinsurance market in its early stages, foreign competitors are seeking to make their way into the Korean market. Top-tier reinsurers domiciled in Korea are trying hard to penetrate into the domestic market with the financial and technical support of their head offices, and other overseas reinsurers specializing in coinsurance are also looking for business opportunities in the Korean market.
Korean Re has been coming up with optimized financial solutions using coinsurance and offering pilot pricing and financial analysis to both life and non-life insurers. We successfully signed our first coinsurance deal with Shinhan Life in January 2022, followed by our second deal with Samsung Life in November 2022. Both deals are based on “asset transfer” type coinsurance, which is considered to be the most traditional form of coinsurance in the global market, as initial consideration (single payment of coinsurance premium) is paid to the reinsurer at the inception of the contract.
In addition to this traditional deal type, we are also actively discussing with other major insurers different types of coinsurance deal opportunities to expand our business territory. In 2023, because of the liquidity problem caused by a higher interest rate environment since the second half of 2022, domestic primary insurers appear to prefer a “funds withheld (also known as reinsurance premium deferral)” type arrangement to an asset transfer type, as there is no cash outgo at the transaction point. Taking this market trend and a cedant’s financial needs into account, we will try our best to write new funds withheld business, while continuing to explore asset transfer business opportunities.
Based on our experience, we will keep improving our expertise on pricing and risk management, and solidify our market dominance by writing new coinsurance deals. Moreover, we are also planning to expand our reinsurance capacity by using our strategic alliance with The Carlyle Group, if necessary. Through all these efforts, we will contribute to the enhancement of the overall growth and profitability of the company’s business.
Gross Written Premiums: Financial Solutions
(Units: KRW billion, USD million)
|FY 2022 (KRW)
|FY 2022 (USD)
|FY 2021 (KRW)
|FY 2021 (USD)
|Asset Transfer Coinsurance