HONG KONG–(BUSINESS WIRE)–AM Greatest has revised its market phase outlook to adverse from secure on South Korea’s insurance coverage business’s non-life insurance coverage sector. Key elements underpinning the revised outlook embody the sector’s deteriorated loss ratios in main enterprise traces, escalated stress on funding earnings amid a historic low rate of interest setting and elevated asset threat as a consequence of capital market volatility.
A brand new Greatest’s Market Phase Report, titled, “Market Segment Outlook: South Korea, Non-Life,” states that South Korea’s non-life insurance coverage phase went by a tough 12 months in 2019, significantly by way of underwriting efficiency. Regardless of a 4.8% progress in gross premium written (GPW), general business web revenue declined by 39.9% 12 months on 12 months, which adopted a 20% lower in 2018. The primary reason behind the poor outcomes was the elevated loss ratio for the auto insurance coverage phase and worse-than-expected profitability within the long-term insurance coverage line. For the reason that outbreak of COVID-19, South Korea’s authorities has launched varied financial stimulus measures, together with a pointy base rate of interest reduce of 50 foundation factors to 0.75% in March, the bottom degree within the nation’s historical past. Though the stock market has partially recovered from bottoming out in mid-March, it has not totally recovered to pre-pandemic ranges.
At current, non-life insurers already face heightened asset dangers by their funding publicity to industries which have been impacted straight by the COVID-19 pandemic. Moreover, though the total severity and longevity of impacts from COVID-19 are but to be decided, AM Greatest expects that the pandemic’s influence on the actual financial system will inevitably lead to better credit score dangers from a broader vary of property, together with direct and oblique investments in actual property.
AM Greatest is of the opinion that the general underwriting efficiency of the non-life phase will proceed to be below stress for the subsequent 12 months. It’s unlikely that the current deterioration in profitability of the market’s largest line of enterprise—long-term insurance coverage—will enhance over the brief time period with out extra basic adjustments, comparable to a revision in protection or extra sufficient pricing that might mirror adjustments in policyholders’ medical behaviour.
Though AM Greatest anticipates the influence of COVID-19 on non-life insurance coverage premium progress within the first quarter to be minimal, a sure degree of recent enterprise contraction will probably be inevitable because the scenario continues for some time. Coverage cancellations are additionally prone to improve with the potential financial fallout from the pandemic. AM Greatest will proceed to intently monitor the event of the business amid the COVID-19 pandemic, and can assess any influence arising on rated insurers in South Korea.
To entry the total copy of this market phase report, please go to http://www3.ambest.com/bestweek/buy.asp?record_code=297360.
To view present Greatest’s Market Phase Outlooks, please go to http://www.ambest.com/rankings/RatingOutlook.asp.
AM Greatest is a worldwide credit standing company, information writer and knowledge supplier specialising within the insurance coverage business. The corporate does enterprise in additional than 100 international locations. Headquartered in Oldwick, NJ, AM Greatest has places of work in cities around the globe, together with London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico Metropolis. For extra info, go to www.ambest.com.
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