Investment returns are expected to provide dependable earnings over the next 12 months.
South Korea’s non-life insurance sector will face a stable outlook, with regulatory measures to strengthen insurers’ capital, stable investment income and expectations that companies will ease aggressive competition to protect profitability.
Regulatory changes are expected to improve insurers’ capital quality and solvency as economic and market conditions evolve, according to AM Best’s research report.
The ratings agency also expects leading insurers with stronger balance sheets to continue pursuing overseas growth opportunities, whilst the wider market shifts its focus from expanding business volumes to improving profitability.
Underwriting profits are likely to remain under pressure, although insurers’ efforts to improve profitability and government measures to reduce excessive medical claims should provide gradual support.
Investment income is expected to remain a stable source of earnings over the next 12 months.
AM Best said South Korea’s economy is expected to grow by 2.6% in 2026, up from 1.1% in 2025, supported by investment in artificial intelligence, strong semiconductor exports and a recovery in the domestic equity market.
However, geopolitical tensions, supply chain disruptions and volatile energy prices remain risks to growth. Inflation is forecast to rise to 2.5% this year from 2.1% in 2025, above the Bank of Korea’s 2% target.
The agency said new regulations, including the introduction of a core capital K-ICS ratio from January 2027 and changes to solvency rules, are designed to strengthen insurers’ balance sheets whilst avoiding excessive pressure on capital levels during periods of interest rate volatility.
Authorities have also issued additional guidance under IFRS 17 to promote more consistent reporting and more conservative actuarial assumptions.
Competition in long-term insurance remained intense in 2025 as insurers sought to increase future profits, contributing to weaker underwriting performance.
AM Best expects insurers to place greater emphasis on improving profit margins rather than expanding business volumes.
It also said tighter rules on commission payments through general agencies from July 2026 should help reduce competitive pressure.
The agency noted that some insurers are looking overseas for growth.
Samsung Fire & Marine is expanding its international business, whilst DB Insurance recently acquired The Fortegra Group to diversify earnings, although such expansion carries execution and capital risks.
The non-life insurance industry recorded weaker underwriting results in 2025 as claims increased in long-term and motor insurance.
Higher medical claims following the end of a medical strike, continued competition and claims inflation weighed on profitability.
Although recent premium increases for motor insurance should help, the benefit is expected to be reflected gradually.
Stronger investment income in 2025, supported by higher interest income and investment gains, helped offset weaker underwriting performance.