- The Financial Supervisory Commission (FSC), at an FSC meeting on August 11, 1998 deliberated management improvement measures for 18 life and 2 non-life insurance companies, accommodating recommendations concerning evaluation results of rehabilitation plans submitted by the appraisal committee.
- For the evaluation of insurance companies' rehabilitation plans, 6 accounting firms conducted assets/liabilities due diligence. Based on these results the appraisal committee consisting of experts from the private sector evaluated the feasibility of rehabilitation plans of the insurance companies and subsequently submitted its recommendation to FSC
- Major features of management improvement measures
o 4 companies that are deemed to have unreasonable rehabilitation plans and thus have minimal chance of implementing them, namely Kukje Life, BYC Life, Taeyang Life and Coryo Life have been identified as non-viable financial institutions and accordingly will be subject to business suspension as of August 11, 1998. Once large life insurance companies interested in acquiring these institutions come forth, business transfer procedures including opinion hearings and acquisition approvals etc. will be carried out in due course.
o 7 life insurance companies (Josun Life, Kookmin Life, Pacific Life, Handuk Life, Hankuk Life, Doowon Life, Dongah Life) with moderately reasonable rehabilitation plans and which thus are deemed to possess the capability to implement their rehabilitation plans but are not surely to satisfy minimum solvency margin requirements by September, 2000 (0%) will be required to make appropriate adjustments to rehabilitation plans and to submit related implementation plans.
o 9 companies (Hanil Life, Shinhan Life, Hansung Life, Daishin Life, Tongyang Life, SK Life, Kumho Life, Haedong Fire & Marine, Dongbu Fire & Marine) with reasonable rehabilitation plans and which are deemed to possess the capability to implement plans with high possibility will be required to submit letter of intents, which are to include quarterly implementation plans
- As without a supplementary scheme, the restructuring of the fidelity/surety insurance sector could cause serious adverse effects on the financial market, it should be determined based on in-depth consideration of the effect on national economy and financial market, fiscal support level, protection of interest of policyholders and other related persons
- Despite of the closure of 4 non-viable companies, policyholders' benefits of existing policies will be protected by the deposit insurance fund in accordance to provisions under the Deposit Insurance Law. Moreover, once business of the non-viable companies are transferred over to financially sound insurance companies, policies will be maintained with no change in contract terms.
- Also even during business suspension
o Companies subject to business suspensions will continue to carry out businesses such as premium collection of existing policies (through bank automatic transfer, Giro, payment at sales office), call back of existing loans, business done on behalf of policyholders.
o Although payments to policyholders including benefit payouts will be suspended for a limited period, upon business transfer payment related businesses will return to normal as well.
- Looking back, problems of the insurance industry were prompted by excessive expenditure and accumulation of non-performing loans as a result of growth-driven strategies pursued in an overcompetitive environment brought about by the establishment of many new life insurance companies domestically, prior to market opening of the Korean life insurance market in 1989.
o For the enhancement of management soundness of insurance companies, "Life Insurance Solvency Margin Regulations" was enacted and enforced in June, 1994 and under such regulations non-viable companies were subject to recapitalization recommendation or recapitalization order but actual results turned out to be short of expected levels.
- In the future special investigations will be conducted for the purposes of identifying and holding concerned persons responsible for unsound management practices through disciplinary measures. Prompt corrective actions procedure will continue to take effect as a way to induce and supervise rehabilitation of the insurance industry.
- The government will exert its utmost effort to minimize policyholder inconveniences throughout the management improvement process and to induce the early normalization of the financial market.
* Please refer to the attached material for details.