KUALA LUMPUR, May 17 (Bernama) – Global credit rating agency, AM Best has revised its market segment outlook to stable from negative for the South Korea non-life insurance industry, according to a new AM Best report.
In the new Best’s Market Segment Report, ‘Market Segment Outlook: South Korea Non-Life Insurance’, AM Best states the revision is based on the following factors.
The factors are, improved underwriting performance, driven by favourable auto loss ratio, outweighing impact of increased long-term medical claims; stabilised expense ratios mainly as a result of reduced market competition; potential asset risk effectively limited and controlled by most insurers amid volatile capital market in 2020; and, market interest rate rebound that may alleviate pressure on running yields of fixed income assets.
Although the ongoing COVID-19 pandemic led to partial disruption of face-to-face sales activities, the impact on overall top-line was limited, given non-life insurers’ large base of recurring long-term insurance premiums and strong growth of automobile insurance due to several rounds of industry-wide rate increment exercises in 2019 and early 2020, as well as fast expanding online sales of automobile insurance.
According to a statement, favourable claims experience due to the reduced traffic during the pandemic also contributed to the material improvement in auto insurance operating performance.
Over the last few years, the South Korean non-life segment reported a rising overall expense ratio–to 23.0 per cent in 2019 from 19.0 per cent in 2015–although it appears to have stabilised at 21.9 per cent last year.
The United States-headquartered AM Best notes the over-competition in the general agency channel has receded with the implementation of a regulatory restriction on sales commissions in January this year and insurers’ effort to recover bottom lines.
Market rates have since rebounded in the second half of last year, and exceeded pre-pandemic levels as of the first quarter of 2021. AM Best expects significant asset volatility or further sharp deterioration in investment yields are unlikely and insurance company’s investment margin to remain at a similar level over the near term.
For more information, visit www.ambest.com.
-- BERNAMA
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