With the introduction of IFRS 17 and K-ICS in 2023, the standards for evaluating financial soundness of primary insurers have been reinforced, and the needs for financial solutions to manage their capital have been growing accordingly.

Major life insurers such as Samsung Life and Shinhan Life are utilizing coinsurance as an effective tool for the improvement of asset liability management (ALM) and the alleviation of P&L volatility, thereby securing capital for shareholders.

In addition, the adoption of lapse risk under K-ICS allowed primary insurers to take advantage of mass lapse reinsurance, creating new reinsurance demand. Mass lapse risk refers to the capital shock that occurs when a large number of policyholders cancel their contracts in the wake of a financial crisis, such as a bank run. Many primary insurers are looking to mass lapse reinsurance covers to manage their solvency ratios.

Coinsurance

Since the introduction of coinsurance into the domestic market in 2020, eight coinsurance deals have been finalized, the total of which are worth about KRW 3 trillion in terms of gross premium reserves. Among these, Korean Re has won four mega deals, representing a market share of more than 50%, or KRW 1.65 trillion in gross premium reserves. This noteworthy achievement underscores our leadership position in the domestic coinsurance market.

Even though we have performed successfully in the early stages of the domestic coinsurance market, it is crucial to acknowledge the evolving market landscape. Foreign competitors are actively pursuing entry into the Korean market, presenting a new set of challenges. Top-tier reinsurers with a presence in Korea are seeking to penetrate the domestic market, backed by financial and technical support from their respective headquarters, while other overseas reinsurers specializing in coinsurance are also exploring business opportunities in the Korean market.

Korean Re remains committed to providing both life and non-life insurers with comprehensive financial solutions, including coinsurance arrangements, employing extensive analysis with respect to accounting, risk, and actuarial aspects. Notably, we are the only reinsurer in Korea to have entered into both asset-transfer and funds-withheld transactions.

We successfully signed our first coinsurance deal with Shinhan Life in January 2022, followed by a second one with Samsung Life in November 2022 and a third one with Samsung Life in November 2023. All these deals were structured as “asset-transfer” type coinsurance, which is considered to be the most traditional coinsurance type in global markets, as initial consideration (single payment of coinsurance premium) is paid to the reinsurer at the inception of the contract.

Additionally, in December 2024, we entered into another coinsurance transaction with a global life insurer. This contract is a “funds withheld” coinsurance arrangement, where the cedant retains the initial consideration and pays interest on the withheld funds. We expect to achieve stable profit from this transaction by implementing hedging strategies using derivative instruments to manage the interest rate risk inherent in the transaction.