Insurers to face toughened capital base requirement from 2027

insurers-capital base

Insurers to face toughened capital base requirement from 2027

SEOUL, Jan. 13 (Yonhap) -- The country's financial regulator said Tuesday that local insurers will have to maintain an enhanced capital ratio requirement starting in 2027, a move to beef up their capital quality.

Under the measures unveiled by the Financial Services Commission (FSC), the ratio of core capital to required capital will be set at 50 percent and above under the Korean Insurance Capital Standard (K-ICS), sharply enhancing the quality of capital that insurers hold.

The introduction of the ratio of core capital, such as paid-in capital and retained earnings, is aimed at ensuring that insurance companies maintain a sound capital base to absorb potential shocks, such as financial stress or market volatility.

The measure will put cost burden on insurers as cost of equity capital is usually more expensive than other forms of capital, such as subordinated debt.

Corrective actions will be taken on insurers whose core capital ratio under the K-ICS falls below 50 percent, but a grace period will be given, according to the regulator.

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