South Korean insurers are moving to bulk up because writing new policies in a saturated domestic market is no longer enough to sustain growth. With population decline shrinking the pool of potential customers and aging shifting the nature of coverage demand, capital regulations are adding to the strain — driving insurers to expand abroad through acquisitions while using capital increases and mergers to strengthen their footing.
Securing a customer base to underpin new demand is another challenge. According to the Korea Insurance Development Institute and the Korea Insurance Research Institute, the life insurance subscription rate among Koreans in their 20s and 30s was as low as 49.9% as of 2023, depending on age and gender. Advances in medical technology, including Moderna's personalized cancer vaccine, are also seen as a variable that could reshape coverage demand over the long term. "Even if health and long-term care needs among older adults grow, insurers need products and sales networks to turn that into contracts," an industry official said. "Demographic change does not translate directly into growth, so the situation is not an easy one."
Large insurers with capital headroom are looking overseas for growth. Samsung Life Insurance and Samsung Fire & Marine Insurance are exploring overseas mergers and acquisitions, backed by accumulated capital and expectations for higher dividends from Samsung Electronics. Hanwha Life Insurance last year completed the purchase of stakes in Indonesia's Nobu Bank and U.S. brokerage Velocity, while DB Insurance acquired a 100% stake in U.S.-based Fortegra in May. The strategy is to secure overseas customers and sales networks to broaden earnings beyond competition for domestic sales.
At home, insurers are combining operations or expanding into new business lines to make better use of existing customers and distribution channels. Woori Financial Group plans to merge Tongyang Life Insurance and ABL Life Insurance to launch an insurer with 55 trillion won ($40.6 billion) in total assets in the second half of next year. The plan is to combine products and sales networks and cut overlapping costs to maximize the benefits of the acquisition. Kyobo Life Insurance is also in early talks on acquiring AXA General Insurance as it weighs entry into the non-life business.
Financial groups' push into insurance is another factor accelerating the shakeup. Korea Investment Holdings was named preferred bidder for KDB Life Insurance, and OK Financial Group's OK Next was selected for Yebyul General Insurance, which took over MG Non-Life Insurance's contracts. Sales of BNP Paribas Cardif Life Insurance and Lotte Non-Life Insurance are also under way. The appeal, industry watchers say, lies in acquiring scale quickly by taking over existing contracts and managed assets rather than building a new insurer and gathering customers from scratch. Demand to combine insurance with existing financial businesses has aligned with insurers' search for new owners.
Pressure to build up capital is also at work in the industry realignment, analysts say. Ahead of the introduction next year of a 50% threshold for the basic capital solvency ratio under the Korean Insurance Capital Standard (K-ICS), insurers face growing pressure to reinforce capital through share issues and retained earnings. Hana Financial Group injected 200 billion won ($148 million) into Hana Insurance in July. Additional capital reinforcement is urgently needed at iM Life Insurance and Heungkuk Fire & Marine Insurance, whose basic K-ICS ratios stood at 29.5% and 47.6%, respectively, in the first half of this year after transitional measures. Hana Life Insurance and Lotte Non-Life Insurance are also below 50%. "This is not only about expanding business but also about building the capital base needed to sustain existing operations," a financial industry official said.
