Nonlife insurers likely to face losses

South Korean nonlife insurers are expected to face losses for the 2012 fiscal year due to a cut in auto insurance premiums and decreasing returns from asset management, industry data showed Tuesday.

Ten local nonlife insurers reported a combined operating loss of 103.2 billion won ($92.6 million) in insurance operations in the April-May period of this year, according to the data.

The operating loss of Samsung Fire & Marine Insurance Co., the country’s leading nonlife insurer, came to 3.4 billion won, while Hanwha General Insurance Co. reported 25.8 billion won in operating losses.

The insurers’ sizable losses are related to a recent cut in premiums for car insurance pushed by the local financial authorities, according to the data.

Local nonlife insurers lowered their car insurance premiums by 2.5 percent in April, as President Lee Myung-bak’s administration stepped up its battle against high inflation amid falling approval ratings during his final year in office.

“Net losses in insurance sales are attributed to the collapse of the self-regulating pricing system in the local market,” a South Korean insurer said.

The weak performance in the April-May period is also attributable to an overall rise in the insurance loss ratio, the proportion of coverage a nonlife insurer pays to its policyholders from the insurance premiums.

“The higher the insurance loss ratio is, the more likely the insurer will go into the red,” a market watcher said. (Yonhap News)