A study on legislation of insurance company debt management with the introduction of the K-ICS

Recently, there is a public opinion that the insurance industry needs to diversify its liability adjustment plans with the introduction of the new Solvency Margin system (K-ICS), which is a system to evaluate the Solvency standard of insurance companies according to IFRS17, which evaluates assets and liabilities at market value. A concern for the domestic insurance industry, which is about to introduce K-ICS, is that if a debt is measured on a market value basis under a low-interest rate trend, debt will increase. If the problem of mismatch between assets and liabilities becomes larger due to an increase in liabilities, the burden of redemption by insurance companies will increase and it is expected that capital management will become difficult. Therefore insurance companies emphasize supporting the need for insurance company debt management. The systems that have been informed in Korea as insurance liability adjustment measures that are attracting attention ahead of the introduction of the new Solvency Margin system include coinsurance, insurance buy-back, and run-off. Although coinsurance has already been introduced and enforced, it is not easy to utilize the system due to the limited utilization of the system such as coinsurance costs, and the effectiveness of the system has been questioned. Next, insurance buy-back that it is not familiar with is a system in which insurance companies pay policyholders a premium for high-interest insurance products sold in the past and eliminate existing insurance policies. From the standpoint of an insurance company, there is not much profit or loss, but the risk burden, which is an immediate issue for insurance companies, is high. It is a system that can contribute to the sustainability of insurance companies. Finally, run-off refers to the transfer of all or part of an insurance contract to another company and is used for the transfer of insurance business, business sale, risk mitigation, etc. of non-core business divisions of insurance companies. This paper considers that it is necessary to diversify insurance company debt management measures for the sound management of the insurance industry at present, when the new Solvency Margin system is about to be enforced. After examining possible legislative reviewing through a comparative study, this paper suggests the legal considerations to introducing insurance company debt management.