Kyobo chief stresses risk management

By Kim Tae-jong

Kyobo Life Insurance Chairman and CEO Shin Chang-jae on Monday stressed the importance of risk management in the insurance industry.

“The life insurance industry has a unique system in which sales growth cannot directly translate into profits when insurers can’t properly manage risks,” he said during a panel discussion at the 49th International Insurance Society’s (IIS) Annual Seminar at the Grand Hyatt Seoul.

The panel discussion took place as part of the seminar, which kicked off Monday for a four-day run. Among those present at the discussion were leading industry players such as AIA Group CEO Mark Tucker, and AIG CEO Robert Benmoshe. They discussed measures to cope with low interest rates and risk managements.

Shin also said that Kyobo has been faithful to the principles that put risk management before profitability to promote growth.

“The essence of the insurance industry is risk management, which does not confront growth but is in line with sustainable growth. Therefore, we should seek a balance between risk management and growth,” he said.

Regarding the measures to tackle low interest rates and reverse margins, he said Korean insurers should reform their structure of interest rates for their debts.

“Local insurers have long sold products with high interest rates,” he said. “So it is not enough to increase profitability from their assets because they suffer from high costs resulting from debts and they should reform their structure of interest rates for their debts (to increase profitability).”

He said that is why Kyobo has focused more on asset liability management rather than product sales and more on risk management than the expansion of market share.

He also hoped that the insurance industry will play a bigger role in a social security system, encouraging insurers to come up with various new products to meet the new trend.

“The role of the insurance industry led by the private sector will be growing due to the changes in the population structure resulting from low birthrates and aging society and the prolonged economic recession,” he said. “Insurers should more actively cope with the new demands with a long-term plan.”

Founded in 1965, the IIS is the world’s largest and most prestigious industry organization, with almost 900 members representing global insurance leaders, international regulatory authorities and worldwide insurance scholars from over 90 countries.

Members of the IIS and experts and officials from regulatory authorities participate in the IIS Annual Seminar to share their insights and discuss current trends and issues. This year, about 450 IIS members from 50 countries are participating in this year’s event under the theme of “Future of Insurance: Reshaping the Industry to Capitalize on Global Trends.”