(Re)in Summary
- Fitch affirmed Construction Guarantee’s Insurer Financial Strength Rating at ‘A+’, with a stable outlook.
- Fitch expects the guarantor’s underwriting performance to recover as the number of troubled members declines and government project budgets rise.
- Construction Guarantee raised its provision for subrogation guarantee payments in H1 2026.
- The guarantor’s five-year return on equity was 1.4% and its combined ratio 100.7%.
- Construction Guarantee’s regulatory capital ratio rose to 243.7% in 2025 from 231.6% in 2024.
Fitch Ratings expects underwriting performance at South Korea‘s Construction Guarantee (CG) to recover as the number of troubled members declines, recoveries improve and budgets for government-led projects rise, the agency said in a statement on 7 October 2026.
Fitch affirmed CG’s Insurer Financial Strength (IFS) Rating at ‘A+’, with a stable outlook. The rating, which Fitch raised from ‘A’ in October 2025, includes a two-notch uplift from CG’s standalone credit quality, reflecting the high likelihood of exceptional state support given the guarantor’s policy role and close government ties.
CG’s profitability has been weak since 2023, as higher interest rates and construction costs weakened its members’ finances and pushed up guarantee claims.
Fitch said performance remains exposed to economic cycles and sector-specific shocks, with high interest rates and inflation posing risks. The pressure continued into 2026, with CG raising its provision for subrogation guarantee payments in the first half because of greater guarantee exposure to certain products and a prior claim. Nonetheless, the ratings agency expects that pressure to ease going forward.
CG’s five-year return on equity was 1.4%, with 1.5% in 2025, 0.3% in 2024 and 1.2% in 2023, while its combined ratio over the same period was 100.7%. Stable investment returns and prudent asset management partly offset the underwriting losses, and Fitch noted that profit maximisation is not CG’s main objective given its policy-oriented role.
The agency said CG’s large capital base and conservative investment strategy provide a sufficient buffer against claims volatility and cyclical pressure, underpinning a Fitch Prism Global Model score of ‘Extremely Strong’ at end-2025. Fitch expects CG to keep the score above ‘Very Strong’ over the medium term.
The business’s regulatory capital ratio rose to 243.7% in 2025 from 231.6% in 2024, against a 100% regulatory minimum, on a revised calculation of subcontractor payment guarantees and lower guarantee exposure. Total capital stayed above KRW6.5trn (US$4.86bn), and guarantee exposure stood at about 24.8 times capital at end-2025, below the regulatory limit of 30 times.
CG introduced a completion guarantee in 2025 to support construction companies struggling with project-financing developments. Fitch expects the guarantor to write such cover selectively to keep its capital position manageable.
CG holds about 52% of the construction guarantee market by underwriting amount, and its focus on domestic construction exposes it to economic and sector volatility. The Ministry of Land, Infrastructure and Transport directly supervises CG, which provides guarantees, insurance and loans mainly to general construction companies. Under the state’s direction, it offers aid to financially vulnerable builders and introduces products to support stability in the sector.
Overseas guarantees have grown since 2020, mainly to financially sound general construction companies, but made up 3.5% of total guarantee exposure at end-2025, with few losses to date.
The affirmation follows AM Best’s affirmation of CG’s ratings in July, when that agency pointed to rising guarantee claims during South Korea’s construction downturn. In June, Fitch also affirmed the ‘A+’ rating of Korea Finance for Construction, which guarantees specialty construction companies, as the same slowdown weighed on its underwriting.
