South Korean insurance companies are expected to benefit from a number of relaxed regulations on asset management as part of a government-led move to loosen up the business environment of insurers that have been suffering from a prolonged slump due to low interest rates.

The Financial Services Commission (FSC) on Sunday unveiled a set of measures that aim to revise various asset management-related regulations for local insurance firms. The measures are part of a follow-up to the financial regulator’s recently announced roadmap to strengthen the competitiveness of the country’s overall insurance industry.

According to the revised measures, insurance companies will be allowed to invest more diversely on foreign assets. Currently, local insurers are regulated to invest only in foreign securities with credit ratings set by international credit rating agencies such as Standard & Poor’s. However, from now on, they will be able to purchase foreign securities that have been approved and qualified by a wider number of credit rating agencies designated by the certain country’s financial regulator.

The FSC has also eased the limit on insurance companies’ trade in financial derivative products. Currently, the maximum investment limit on derivatives is set based on agreed terms stated in the contract. The regulator, however, has given more leeway in the limit by allowing insurance companies to set the cap for low-risk investments based on the amount of consignment guarantee money. It has also removed the insurers’ ownership requirement of investment-type subsidiaries such as venture capitals, real estate investment trusts (REITs) and private equity funds (PEFs). Insurance companies investing in foreign currency-denominated funds are no longer subject to the mandatory requirement of receiving deliberation by the regulator’s investment committee while regulations have been eased on restricted insurance products.

By Chung Seok-woo

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