Insurance firms in South Korea are required to gradually increase their capital reserves from the end of this year, the financial regulator said Wednesday, in the latest step to help them better cope with changes in global accounting rules.
South Korea is one of more than 100 nations that will adopt the new global bookkeeping standard or the International Financial Reporting Standards 17, starting in January 2021.
When adopted, some insurers in South Korea will face capitalization pressure because the new rules require insurers to report liabilities on a market value, instead of book value of insurance policies.
To help insurers raise their capital reserves, the Financial Services Commission said it will gradually cut discount rates for insurance liabilities by 2019.
In order to ease financial burdens for insurers, the financial regulator said it will recognize 90 percent of newly added capital this year as risk-based capital that shows an insurer's ability to pay policyholders.
The financial regulator will recognize 80 percent of new capital as risk-based capital in 2018, 70 percent in 2019 and 60 percent in 2020.