According to the revision of the insurance industry law last year, the minimum capital of the newly introduced’small short-term insurance company’ will be greatly reduced from 30 billion won to 2 billion won.
The Financial Services Commission announced on the 4th that it will introduce the insurance business specializing in small and short-term, and announce the legislation of the insurance business law, which contains detailed standards for such details.
First, the capital requirement was significantly lowered to 2 billion won in order to revitalize small-term insurance. This standard plans to review adjustments in consideration of the entry demand of new business operators and whether the system is settled in a stable manner.
Handling products are also permitted to handle all items other than those requiring long-term guarantees such as pensions and nursing care and those requiring high capital such as automobiles.
Considering the occurrence of unexpected risks, the insurance period will be set to one year in the enforcement ordinance and supervisory regulations. The maximum amount of insurance premiums was set at 50 million won, which is the upper limit for depositor protection, and the annual total income insurance premium was set at 50 billion won, similar to that of Japan.
External verification for the adequacy of responsible reserves is also mandatory. Insurance companies with total assets of KRW 1 trillion or more must obtain verification of the adequacy of liability reserves from external independent actuaries, etc.
Even if the total assets are less than KRW 1 trillion, external verification is obligated when handling insurance items for which securing solvency is important.
The verification items are subject to the adequacy of the assumptions used in calculating and evaluating the adequacy of the liability reserve and the adequacy of the liability reserve once a year, considering that the method of calculating the liability reserve becomes complicated due to the introduction of international accounting standards.
In order to secure the effectiveness of external verification, the right to request data from the verification agency to the insurance company was also newly established. In addition, for objective verification, it is stipulated that insurance companies cannot receive verification from the same external agency for four consecutive business years.
In addition, the Financial Services Commission clarified that insurance companies can own credit information management and healthcare companies as subsidiaries. When an insurance company owns a subsidiary that is mainly engaged in business closely related to asset management, the related procedures are eased through follow-up reporting rather than prior approval and reporting.