Foreign insurers urged to warm up for new accounting rules

South Korea's financial authorities requested foreign insurers here Friday to take "pre-emptive" measures to embrace new accounting standards.

Zhin Woong-Seob, governor of the Financial Supervisory Service, delivered the message in a breakfast meeting in Seoul with the CEOs of 13 foreign insurance firms operating in the country.

He noted that the International Financial Reporting Standards 4 Phase II will be applied to insurers here starting in 2021.

Under the rule, their liabilities will be assessed on the basis of market value, not book value. It's expected to enable a much "fairer" assessment on insurers' ability to withstand stress and also force them to have more capital bases and reserves to cover potential losses.

"The implementation of IFRS 4 Phase II will have a huge impact on the industry as a whole," Zhin emphasized. "In this regard, foreign insurers should cooperate with their headquarters, taking pre-emptive measures, such as capital base expansion, if necessary."

The FSS chief also asked them to make efforts to deal with insurance claims swiftly and accurately based on insurance clauses to satisfy customers.

He cited the government's announcement of the "roadmap for insurance business reform" in October last year intended to meet the need in the "New Normal" era of low growth and interest rates.

It has "helped increase autonomy of insurance companies in developing products and deciding insurance premiums and stimulate innovation and competition between insurers," Zhin said.

He stressed that greater autonomy means more responsibility. (Yonhap)