The reported capitalization of South Korean life insurers is expected to face pressure if they adopt a new international accounting standard, credit appraiser Moody's Investors Services said Tuesday.
South Korean life insurers have been preparing to report financial results under International Financial Reporting Standards 17, which will go into effect in South Korea from 2021.
Stella Ng, a vice president of Moody's, said the new global accounting standard will require life insurers to measure their policy liabilities at current interest rate values and therefore provide higher levels of reserves.
However, the new accounting standard is likely to have a positive impact on South Korean life insurers, Ng said.
"Nevertheless, beyond the pressure on insurers' capitalization profiles, the new standard will, over time, promote structural improvements and value creation in the industry," Ng said in a statement.
The new accounting standard "will improve insurers' pricing discipline and product mix by better reflecting the true economic cost of embedded options and guarantees in their products," the statement said. (Yonhap)