Capital soundness looms over major insurers' CEO reappointment decisions
From left, Samsung Life Insurance CEO Hong Won-hak, Samsung Fire & Marine Insurance CEO Lee Mun-hwa, DB Insurance CEO Jeong Jong-pyo and Kyobo Life Insurance co-CEO Cho Dae-kyu / Courtesy of each company
With the terms of major insurers’ CEOs set to expire early next year, the companies’ capital strength is emerging as a key factor in their chances of reappointment, particularly as new rules requiring insurers to hold stronger financial cushion against losses are set to take effect in 2027, industry officials said Wednesday.
The terms of Samsung Life Insurance CEO Hong Won-hak, Samsung Fire & Marine Insurance CEO Lee Mun-hwa, DB Insurance CEO Jeong Jong-pyo and Kyobo Life Insurance co-CEO Cho Dae-kyu are all due to expire in March.
All four companies reported higher consolidated net profit in the first half of this year. Samsung Life posted 1.97 trillion won, followed by Samsung Fire & Marine with 1.37 trillion won, DB Insurance with 979.6 billion won and Kyobo Life with 704.8 billion won.
But their capital positions showed a more mixed picture. The Korean Insurance Capital Standard (K-ICS) ratio, which measures an insurer’s financial ability to cover its liabilities and risks, rose at Samsung Fire & Marine in the second quarter to 282.8 percent, but fell at the other three — Samsung Life at 208.2 percent, DB Insurance at 204.4 percent and Kyobo Life at 200.8 percent.
The quality of that capital is also becoming more important. Starting next year, insurers will face a new regulation requiring them to maintain higher levels of basic capital — such as retained earnings, which can absorb losses more directly — relative to the amount of broader capital deemed necessary to cover their risks. Accordingly, firms must raise their basic-capital K-ICS ratios to at least 50 percent of required capital by 2035.
The companies’ ability to generate profits from their core insurance businesses will also come under scrutiny. At Samsung Life, investment gains helped lift overall earnings, but profit from its insurance business fell 35.9 percent from a year earlier to 533 billion won in the first half.
Kyobo Life faces a similar challenge. Its consolidated net profit increased with help from stronger results at its affiliates, but profit from its core insurance business fell 10.3 percent to 227.5 billion won.
DB Insurance, meanwhile, must account for the capital demands of its overseas expansion, including its roughly 2.3 trillion won acquisition of U.S. insurer Fortegra. A larger international business can create new sources of growth, but it also puts pressure on its solvency ratio if its capital base does not keep pace.
For the four CEOs, the challenge is therefore not simply to deliver higher profits, but to show that those earnings are sustainable, that their core insurance businesses remain competitive and that their companies can maintain strong capital positions as regulatory requirements tighten. Observers say those will be important considerations as their reappointment decisions approach.