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Photo = Yonhap news |
[Alpha Biz= Paul Lee] Seoul, June 1 —Seoul, June 1 — South Korea’s Financial Supervisory Service (FSS) has launched an on-site inspection of KDB Life Insurance, following the company’s plunge into a state of complete capital erosion. The move is intended to assess the firm’s solvency, insurance contract status, and potential recovery measures, according to a report by the Dong-A Ilbo.
The inspection was conducted from May 21 to 23 at the company's headquarters in Yongsan, Seoul. The FSS aims to scrutinize KDB Life’s financial condition after the insurer posted a net capital deficit of KRW 134.8 billion at the end of March, with liabilities exceeding total assets. This marks a sharp deterioration from the KRW 61.3 billion in positive net assets reported just three months earlier.
Notably, the KRW 134.8 billion shortfall includes KRW 240.2 billion in hybrid capital securities, which are treated as equity under accounting standards but are, in fact, repayable liabilities. Excluding these, KDB Life’s effective net asset value drops to minus KRW 375 billion, resulting in a capital impairment ratio of 175%.
This is not the first time the company has slipped into capital deficit territory — KDB Life was already in a capital-impaired state in November 2023, January, and February 2024, based on monthly internal reports.
The primary cause of the company’s capital deterioration is the adoption of the new IFRS 17 accounting standard, which increases the recorded size of insurance liabilities. This shift has amplified the insurer’s obligations to policyholders. Compounding the issue is the ongoing decline in interest rates, which, while boosting the market value of bonds held by insurers, simultaneously increases the present value of insurance liabilities.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
