Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Did Korean Re prevent Carlyle from investing in JC Partners, KDB Life?
Korean Reinsurance Company CEO Won Jong-gyu, left, and JC Partners CEO Lee Jong-chul
By Park Jae-hyuk
Carlyle Group CEO Kewsong Lee
By Park Jae-hyuk
JC Partners is facing growing concerns over the possible failure of its plan to attract investments from Carlyle Group, which is intending to enter the reinsurance business after acquiring KDB Life Insurance.
This concern has arisen as the Korean Reinsurance Company (Korean Re) has pre-emptively formed a partnership with Carlyle to take the lead in the domestic “co-insurance” sector.
“Co-insurance” is a type of reinsurance allowing insurers to transfer all kinds of possible outstanding risks to a reinsurer. The co-insurance business has been available here since late June, after the Financial Services Commission (FSC) eased regulations on the reinsurance industry. The FSC also lowered the minimum equity requirement for reinsurance to 10 billion won ($8 million) from 30 billion won.
Taking advantage of the deregulatory measures, JC Partners has sought to enter the co-insurance market after transforming KDB Life into a reinsurance company. The domestic private equity firm (PEF) was selected in July as the preferred bidder for the acquisition of KDB Life, whose worth is estimated at around 550 billion won.
Its plan has been regarded as a looming threat to Korean Re which holds over a 57 percent share in the domestic reinsurance market, given that Carlyle was told to consider investing in JC Partners. Carlyle has expanded its presence in the insurance industry worldwide, after acquiring a 19.9 percent stake in DSA Reinsurance Company from AIG in 2018.
The world's leading PEF, however, unexpectedly signed a memorandum of understanding (MOU) with Korean Re, July 31, to share its knowledge in the co-insurance sector and expand its presence in the local reinsurance market. Korean Re said Tuesday they agreed to develop services tailored for domestic insurers.
A Korean Re spokesman told The Korea Times it would be difficult for Carlyle to form a similar alliance with another Korean company.
“We did not discuss Carlyle's relationship with JC Partners and KDB Life,” he said. “But as far as I know, Carlyle has yet to have any legally binding agreement with JC Partners.”
Some industry sources said Carlyle may have thought it would be better to join hands with the market dominant Korean Re, instead of JC Partners which needs more time to close the acquisition of KDB Life and transform it into a reinsurer.
Another concern for JC Partners is its unproven track record in handling the reinsurance business. Industry officials noted the buyout firm will need huge capital for risk-taking, if it wants to compete with Korean Re and foreign reinsurance companies.
“A reinsurer should be able to take risks from all insurers it signed with,” an insurance industry official said.
Although the current minimum equity requirement stands at 30 billion won, reinsurers need at least 300 billion won to 500 billion won for stable management, said officials.
JC Partners has dismissed the concerns, showing confidence in its cooperation with Carlyle. It said it had been aware that Carlyle would form an alliance with Korean Re before the announcement.
“The partnership between Carlyle and Korean Re cannot prevent the global PEF from collaborating with us,” a JC Partners executive said. “Because Carlyle has been interested in the Korean market, we have discussed the co-insurance business with Carlyle for a long time.”
According to JC Partners, however, Carlyle has yet to decide whether to finance the KDB takeover deal or just to share its knowledge in the reinsurance industry with JC Partners.
Despite these uncertainties, JC Partners has emphasized there will be no setbacks in its KDB Life takeover. The PEF has already attracted a 100 billion won investment from Woori Bank, which expects a rise in KDB Life's valuation following the life insurer's transition into a reinsurance company.