South Korean insurers' loan assets grow $1.5B in Q2, but delinquency and bad debt rates rise

South Korean insurance companies saw their total loan assets expand by 1.9 trillion won (approximately $1.5 billion USD) in the second quarter, reaching a total of 266 trillion won by the end of June. This growth, a 0.7% increase from the previous quarter, was driven by a 1.6 trillion won rise in household loans and a 300 billion won increase in corporate loans.

However, this expansion in lending has been accompanied by a worrying trend: a rise in both delinquency and non-performing loan ratios. The overall delinquency rate for insurers climbed to 1.08% in the second quarter, a 0.26 percentage point increase from the prior period. While household loan delinquency saw a slight decrease of 0.04 percentage points to 0.83%, corporate loan delinquency surged by 0.41 percentage points to 1.21%.

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Due to recent increases in economic volatility and delays in economic recovery, the delinquency and non-performing loan ratios for the insurance sector have risen.

Similarly, the non-performing loan (NPL) ratio for insurers rose to 1.31%, an increase of 0.18 percentage points. Household loan NPLs slightly decreased by 0.01 percentage points to 0.67%, but corporate loan NPLs jumped significantly by 0.27 percentage points to 1.62%.

The Financial Supervisory Service (FSS) cited increasing economic volatility and a delayed economic recovery as the primary reasons for the deteriorating asset quality. The FSS stated it plans to guide insurers to sufficiently bolster their loss-absorption capacity and enhance asset quality management to address these rising risks.

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We plan to guide them to sufficiently bolster their loss-absorption capacity and enhance asset quality management.