Korean Re seeks overseas expansion for turnaround

By Jhoo Dong-chan

Korean Reinsurance Company (Korean Re), which has suffered a prolonged slump in earnings for years, is seeking to make inroads into overseas markets.

Based in Seoul, Korean Re is the world's 10th-largest reinsurance company in terms of gross written premiums.

Korean Re's earnings peaked in 2015, but have been declining since due to the nation's saturated insurance market and an increasing number of natural disasters across the world.

In a bid to overcome the difficulties, Korean Re is now eyeing markets in Asia and Europe to diversify its revenue portfolio. It said it aims to generate nearly half of its earnings from overseas markets.

Korean Re, led by CEO Won Jong-gyu who took the helm in 2013, said it posted record-high earnings of 186.2 billion won ($159.5 million) in 2015, but has posted disappointing net profits for the past three years.

The reinsurer's sales jumped 4.9 percent year-on-year to 7.55 trillion won in 2018, but its net profit fell by 22.5 percent to mark 102.7 billion in the period.

Of last year's sales of 7.55 trillion won, Korean Re earned a 1.86 trillion won premium from the overseas market. The figure accounts for 24.6 percent of its total sales last year.

Korean Re said it aims to raise its annual premium income from overseas market to 3 trillion won.

“It's getting more difficult to produce revenue sources here,” a Korean Re official said. “It's inevitable for insurers to eye overseas markets for growth.”

The financial regulator's unfavorable stance toward Korean Re is another factor behind the reinsurer's concentration on the overseas market.

The Financial Service Commission (FSC) has been encouraging local non-life insurers since June last year to enter the nation's reinsurance market to unravel Korean Re's de facto monopoly position.

So far, no insurers have yet to display an interest in setting up a new reinsurer, citing Korean Re's dominant position in the market.

“I believe a new reinsurer's entry will bring a positive effect in the current market structure,” said a non-life insurer official who asked not to be named.

“However, Korean Re's current dominance is nearly untouchable. It seems the FSC wants to bring some change in the market.”

Reinsurance is a form of insurance purchased by insurance companies in order to mitigate risk. It can limit the amount of loss an insurer can potentially suffer, protecting insurers from financial ruin, such as mass insurance claims after a series of natural disasters.