AIG Korea advised to improve management

By Kim Bo-eun

Financial authorities have advised AIG Korea, the local arm of the U.S. insurance giant American International Group, to improve management of risks associated with insurance products.

According to the Financial Supervisory Service (FSS), the Financial Services Commission (FSC) recently advised the general insurance company to make such improvements in early April, based on a regular inspection carried out by the FSS in the last two months of 2018.

The FSC is the nation's top regulator overseeing the FSS, a quasi-government financial watchdog.

An official at the FSS, which conducted the ”Risk Assessment and Application System” (RAAS) inspection, said "AIG Korea scored below the standard on two criteria on managing risks concerned with its insurance products.”

The company was also found to have problems with board meetings, audits and protecting consumers.

It is unusual for an insurer to be advised to improve management, since former cases were centered on their ratio of risk-based capital (RBC), according to the FSS official.

AIG Korea has one of the highest RBC ratios among general insurers here ― at 411.4 percent, according to data from the FSS released earlier in April. Insurers are notified to improve their RBC ratio if it is below 100 percent.

Based on the results of the inspection, AIG Korea is required to submit a plan on how it will improve risk management of its products, within two months.

"The results pertain to internal operational management only. There may have been some operational insufficiencies during the early stages when AIG Korea first introduced long-term products in 2016,” AIG Korea spokeswoman Han Mi-jeong said.

She said the company is in the process of drawing up a plan, which will be submitted within the required time period.

"AIG Korea is vigorously implementing appropriate corrective measures and we expect all actions for improvement will be executed within this year," she said.

Once the plan is submitted, financial authorities will look into it over a one-month period. If deemed acceptable, authorities will monitor how the company follows through with the plan.

If the plan is considered insufficient, authorities can take stricter measures including requiring the company to change executives, close down or merge branches or suspend some business activities.