SEOUL, April 27 (Yonhap) -- Insurance companies in South Korea saw their risk-based capital ratio fall in the fourth quarter of last year, data showed Monday.
The risk-based capital (RBC) ratio -- the actual solvency capital divided by the minimum solvency capital required -- of insurance firms stood at 269.5 percent at the end of December, down 17.4 percentage points from three months earlier, according to the data from the Financial Supervisory Service (FSS).
The RBC ratio is required to stay above the regulatory standard of 100 percent, the FSS said.
The FSS said it will encourage insurance companies to preemptively improve their financial stability by expanding capital and strengthening the crisis situation analysis in case there are concerns over the falling RBC ratio.
Insurance firms in South Korea are required to gradually increase their capital reserves to better cope with tougher global accounting standards for insurers.
Under the new rules, set to take effect in 2022, insurers' liabilities will be assessed on the basis of their market value rather than book value. This 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.
The change of global accounting rules 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.
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