KDB Life's transformation to shake up Korean reinsurance market

Firm's planned shift to reinsurance takes advantage of loosened regulations

KDB Life's transformation to shake up Korean reinsurance market

Insurance News

By Gabriel Olano

The Korean reinsurance market may be receiving a shakeup, with KDB Life Insurance’s planned transformation into a reinsurer bringing more competition for dominant player Korean Re.

JC Partners, which recently emerged as the frontrunner to acquire KDB Life, plans to transition the company into the reinsurance business. The move would place KDB Life in direct competition with Korean Re, according to a report by The Korea Times.

The report, citing industry sources, said that JC Partners will acquire KDB Life for KRW550 billion (US$458 million). The buyer will take advantage of the loosening up of several reinsurance regulations in the market by the Financial Services Commission (FSC).

Some of these deregulatory actions include lowering the minimum equity requirement from KRW30 billion (US$25.1 billion) to KRW10 billion (US$8.4 million), as well as exempting reinsurers from several regulations that are applied on general insurers.

However, experts have noted that in order to compete with Korean Re and international reinsurers, a new player must have huge reserves of capital to absorb risks.

“A reinsurer should be able to take risks from all insurers it signed with,” an insurance industry official was quoted as saying by the report. “Although the current minimum equity requirement stands at KRW30 billion, reinsurers need at least KRW300 billion to KRW500 billion for stable management.”

Meanwhile, Woori Bank said that it will place a KRW100 billion investment in a JC Partners-managed private equity fund working on the KDB Life acquisition, expecting an increase in the firm’s valuation once it has transformed into a reinsurer.

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