Anna Jiwon Park has been covering the politics at The Korea Times since the summer of 2024, when she joined the press pool for the Office of the President in Korea. Prior to that, she spent about five years reporting extensively on financial markets, regulatory authorities and the financial industry. She joined The Korea Times in 2019 after spending eight years as a broadcast journalist at Arirang TV, Korea’s leading global broadcaster, covering politics, defense and culture.
Local insurers to enjoy more leeway in overseas acquisitions
Financial Services Commission (FSC) Chairman Kim Joo-hyun speaks during a financial deregulation meeting at the Government Complex in central Seoul, Monday. Courtesy of FSC
By Anna J. Park
By Anna J. Park
Insurance companies will be allowed to acquire non-insurance subsidiaries in overseas countries as early as the second half of this year. The move is part of policy directions announced earlier this week by the Financial Services Commission (FSC), the country's top financial regulator, aiming to strengthen local insurers' global competitiveness and foster long-term growth potential.
The FSC decided at its eighth deregulation meeting that local financial companies, including insurers, will have more autonomy in their acquisitions of non-insurance firms in foreign countries and more leeway in sending capital to overseas subsidiaries.
“By easing regulations on financial companies' acquisition of overseas subsidiaries, the FSC aims to raise local financial firms' competitiveness, allowing them to offer converged services, combing both financial and non-financial sectors,” FSC Chairman Kim Joo-hyun said, stressing that now is the right time to solidify the long-term growth potential of local financial companies through deregulation.
Currently, the Insurance Business Act stipulates that local insurance companies are required to earn approval from the FSC when planning to acquire non-insurance firms, such as banks, in overseas markets. Although the top financial authorities have been approving such deals by insurers, the new process will become speedier and more convenient for insurers, as insurance companies no longer need to earn approval prior to acquisition of non-insurance overseas subsidiaries. The act is due for revision before the end of the year.
Industry watchers say that while the move should provide some benefits for local insurers, more fundamental deregulation in terms of local business practices will be needed to foment further development of the insurance sector.
“The policy direction will obviously help local insurers, as it gives them more autonomy in their strategic decisions to acquire overseas subsidiaries,” Han Sang-yong, a research fellow at the Korea Institute of Finance (KIF) who holds expertise in the insurance sector, told The Korea Times, Friday. “However, it wouldn't provide enough motivation for local insurance firms to make aggressive forays into overseas markets, as it usually takes several years for an acquired overseas non-insurance subsidiary to start turning a profit.”
He added, “For instance, the length of a CEO's term is usually a couple of years, and it's hard for them to make M&A decisions in overseas markets that tend to make profits, at best, a few years after the acquisition. Thus, I think more fundamental deregulation in the area of capital increase and local business practices are necessary to spur insurers' long-term growth.”