By Yoon Ja-young
Staff Reporter
AIG United Guaranty, AIG Group's mortgage insurance arm, accelerated its advance into the Korean mortgage insurance market, getting final approval from the Financial Services Commission (FSC) last week.
``Mortgage insurance will help Korean consumers more quickly achieve their dream of buying their own home and help banks stabilize their operating systems and strengthen financial stability. The risk management on the private sector will also minimize the housing market's dependence on the government's financial support,'' said Michael Chung, country manager of the AIG United Guaranty Insurance Asia.
Mortgage insurance guarantees that the mortgage will be paid back to the lender even if the subscriber fails to do so. Subscribers can buy homes with less cash and the lenders can minimize the risk of default by transferring the risk or sharing it with the mortgage insurer.
AIG launched the first mortgage insurance here jointly with Seoul Guarantee Insurance in December last year, after getting preliminary approval from the FSC in November. AIG will be the reinsurer. Since then it has sold a total of 1,297 insurance packages on 95.5 billion won in mortgages through Woori Bank, Hana Bank, Kyobo Life Insurance and National Agricultural Cooperative Federation.
``Korea's mortgage insurance market has huge potential. We expect the annual sales to reach 150 billion won after three years,'' Chung said. He said the Korean real estate market is very much advanced, with people valuing having one's own home and government setting appropriate regulations.
Not everybody can subscribe to mortgage insurance. The home shouldn't be located in an area designated as a speculative zone by the government, and have a maximum area of 85 square meters. The home should be intended for residential purposes, not investment purposes, and the loan should be long term. Chung estimated around 6.5 percent of the total mortgage, or 19 trillion won, was eligible for the insurance.
The insurance premium is less than 0.3 percent of the housing mortgage loan, and the premium should be paid every year.
AIG said it would expand sales channels to other banks, and added that it plans to launch products with Samsung Life Insurance and Korea Life Insurance as well.