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Enhancing Capitalization

Best's Review, 2013-11 (7), p.60

Copyright A.M. Best Company Nov 2013 ;ISSN: 1527-5914 ;EISSN: 2161-282X

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  • Title:
    Enhancing Capitalization
  • Subjects: Bond portfolios ; Capital requirements ; Financial leverage ; Insurance companies ; Insurance industry ; Interest rates ; International finance ; Investments ; Regulation ; Small & medium sized enterprises-SME ; Solvency ; Stockholders
  • Is Part Of: Best's Review, 2013-11 (7), p.60
  • Description: A tightening regulatory risk-based capital regime coupled with the recent rises in interest rates has prompted South Korean insurers, in particular small to midsize companies, to seek enhanced capitalization. South Korea's Financial Supervisory Service reported that the RBC ratio of the country's insurance industry (both life and non-life companies) declined by 34.1 percentage points to 273.7% in the quarter ended Jun 30, 2013, while five-year government bond yields jumped to 3.14% from 2.58% during the same period. The non-life companies' average regulatory solvency margin dropped 20.6 percentage points to 264.3%, while life companies saw their regulatory RBC ratio decline 39.8 percentage points to 277.7%. Although the companies issuing subordinated bonds have secured relatively low levels of interest expenses at less than 5%, these companies are expected to see an increase in financial leverage with the new issuances. Insurers' overall financial leverage remains relatively low at around 3% as of September 2013, compared with about 15% five years ago.
  • Publisher: Oldwick: A.M. Best Company
  • Language: English
  • Identifier: ISSN: 1527-5914
    EISSN: 2161-282X
  • Source: ProQuest Central
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