Climate change and new regulations are expected to stimulate growth in South Korea’s reinsurance industry during the next four years, according to the latest analysis.
GlobalData predicts that the industry will grow at a rate of 7%, from KRW9.6trn (US$8.4bn) in 2021 to KRW13.4trn ($US11.9bn) in 2026. The data and analytics specialist says the South Korean reinsurance industry registered a 6.6% growth in 2021, recovering from a subdued 0.7% growth in 2020 due to the impact of the COVID-19 pandemic. General reinsurance accounted for 78% of the country’s reinsurance market, while life reinsurance took up the remaining 22%.
“Growth in 2021 was supported by the introduction of co-insurance in 2020 that allowed insurers to transfer various financial risks such as investment risk, interest rate risk and insurance risk to reinsurers,” said GlobalData insurance analyst Swarup Sahoo. “The country’s susceptibility to natural disasters has increased insurers’ catastrophic risk and forced them to increase the portion of ceded premiums with reinsurers. This has also supported the reinsurance growth in 2021.”
The reinsurance market growth in South Korea will be supported by the expected roll-out of the new capital regime, Korean Insurance Capital Standard, from 2023, along with the continuation of the IFRS 17 regime. GlobalData said insurers will be required to maintain higher risk-based capital under the new regime, which will squeeze their capital buffer and increase dependence on reinsurance. Reinsurers will also benefit from co-insurance, as it allows insurers to manage capital effectively by transferring risks.
The introduction of compulsory liability insurance for medical device manufacturers and importers in 2022 is also expected to support general reinsurance growth.
“The rising frequency of natural disasters such as floods and landslides due to climate change will also support reinsurance growth,” Sahoo added.