South Korea's financial regulator is seeking to temporarily relax regulations in the country's insurance industry, in a bid to prevent insurers from selling bonds.
The goal is to stabilize the country’s money market, reported Pulse, which is part of Maeil Business News. Under measures announced by the Financial Services Commission and Financial Supervisory Service after a meeting with life insurers, insurance companies’ liquidity index evaluation rating will be upgraded by one notch in their risk assessment and application system (RAAS) evaluation until the end of this year. An insurer with a second-grade evaluation rating will be moved up to first grade and one with fifth grade to fourth grade. The regulator will also temporarily allow insurers to include assets with a maturity of more than three months like bonds that are immediately cashable as liquidity assets. Currently, assets of under three-month maturity are regarded as liquidity. In response to this, insurance companies should refrain from selling bonds and cooperate with the government to stabilize the money market as institutional investors, the financial authority urged. The financial authority has decided to relax regulations in the insurance industry as life insurers face rising capital strain. It has also become harder for insurers to raise funds after Heungkuk Life Insurance’s decision to postpone exercising a call option, originally scheduled on 9 November, for its dollar-denominated perpetual note worth $500m. Heungkok Life's decision, announced on 1 November, has heightened volatility in the debt market. Insurers find themselves in need of more cash to cover increasing insurance cancellation requests by policyholders seeking to move money to banks for higher interest rates but the lack of financial facilities has forced them to sell bonds to raise funds. Life insurance companies reported a net purchase of KRW3.9tn worth of bonds in August, but they turned into net bond sellers in October to the tune of KRW2.1tn.