SEOUL, Oct. 10 (Yonhap) -- South Korea's financial regulator said Thursday it has decided to delay a plan to bolster capital rules on insurance firms, in line with a one-year delay of implementing tougher global accounting standards for insurers.
South Korea is one of more than 100 nations that will adopt the new global bookkeeping standard, or the International Financial Reporting Standards 17, starting in January 2021. Insurance firms, however, get a 12-month delay on implementing the new rules after the global insurance industry called for more time to adopt to the change.
Under the new rules, insurers' liabilities will be assessed on the basis of their market value rather than book value. It is aimed at enabling a fairer assessment of insurers' ability to withstand stress and to have a larger capital base and reserves to cover potential losses.
To prepare for the sweeping change in accounting rules, South Korea's Financial Services Commission (FSC) has encouraged local insurers to gradually increase their capital base by 2021.
The delay will allow local insurers to jack up their capital base by the end of 2022, the FSC said in a statement.
Analysts have warned that some insurers may face capitalization pressure if the new accounting rules are adopted.
The change of global accounting rules also comes at a time when the local insurance industry is struggling with lackluster growth as demand for insurance policies has fallen amid low interest rates and a slowing economy.
In 2018, local insurance firms saw their combined net profit decline 7.4 percent to 7.27 trillion won (US$6 billion).
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