KUALA LUMPUR, May 28 -- AM Best has revised its market segment outlook to negative from stable on South Korea’s insurance industry’s non-life insurance sector.
Key factors underpinning the revised outlook include the sector’s deteriorated loss ratios in major business lines, escalated pressure on investment earnings amid a historic low interest rate environment and increased asset risk due to capital market volatility.
A new Best’s Market Segment Report, ‘Market Segment Outlook: South Korea, Non-Life’ states that South Korea’s non-life insurance segment went through a difficult year in 2019, particularly in terms of underwriting performance.
Since the outbreak of COVID-19, South Korea’s government has introduced various economic stimulus measures, including a sharp base interest rate cut of 50 basis points to 0.75 per cent in March, the lowest level in the country’s history.
According to a statement, although the stock market has partially recovered from bottoming out in mid-March, it has not fully recovered to pre-pandemic levels.
At present, non-life insurers already face heightened asset risks through their investment exposure to industries that have been impacted directly by the COVID-19 pandemic.
Additionally, although the full severity and longevity of impacts from COVID-19 are yet to be determined, AM Best expects the pandemic’s impact on the real economy will inevitably result in greater credit risks from a broader range of assets, including direct and indirect investments in real estate.
More details at www.ambest.com
-- BERNAMA
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