Korean Re achieved double-digit growth in GWP and NWP in 2022, driven by new coinsurance transactions and global market hardening. The reinsurer recorded KRW 9,878.6 billion (US$7.37 billion) in GWP and KRW 7,337.6 billion (US$ 5.47 billion) in NWP, up 16.4% and 21.1% respectively from the previous year.
Underwriting performance saw a slight improvement, with a combined ratio of 100.7%, down 0.2 percentage points from a year earlier. Domestically, their technical results improved in spite of increased frequency and severity of large commercial losses and higher natural disaster losses.
Overseas business saw a sharp recovery, with premiums surging by 17.2%. The share of overseas business now accounts for 26.5%, up from 23.1% in 2022.
On the investment side, Korean Re has taken a flexible approach in managing their alternative investments and loan portfolio in response to market changes and regulatory developments. This resulted in a solid investment yield of 3.5% in 2022.
IFRS 17
Korean Re has been preparing to implement IFRS 17 since 2017, with a Master Plan established in 2018, a financial reporting system launched in 2020, and accounting system upgrades in 2022.
In 2022, the transition to the new system was completed and an external audit was conducted. The business has provided staff education on IFRS 17 and underwriting policy and pricing processes have been improved to take into account the long-term financial impacts of the new accounting standard. Korean Re is now going live with IFRS 17 in 2023 and are expecting in a smooth transistion.
ESG
Korean Re has declared its intention to phase out coal financing and has not provided facultative reinsurance covers for new coal projects since January 2023.
To support its environmental, social, and governance (ESG) initiatives, it issued KRW 230 billion worth of sustainability bonds in May 2022, which have been evaluated to be in full compliance with the Korean government’s guidelines and the Sustainability-Linked Bond Principles of the International Capital Market Association (ICMA). The funds will be used for environmental and social projects, such as renewable energy development, and will be managed with the approval of the Investment Deliberation Committee, with regular reporting and disclosure of information.
Performance of Domestic Lines of Business
Korean Re’s domestic business generated KRW 7,257.1 billion (US$5.4 billion) in GWP, up 16.1% from the prior year. If coinsurance business was excluded, the growth rate would have only been 3.2%.
A summary of individual lines performance is as follows:
- Coinsurance – In response to the implementation of IFRS 17 and K-ICS in 2023, major life insurers such as Samsung Life and Shinhan Life have been utilizing coinsurance for asset-liability management (ALM); the overall market size is expected to grow and Korean Re successfully positioned itself as the leader in the domestic coinsurance market having brought in two deals, totalling 99% of the entire premium size. GWP for coninsurance was KRW 801 billion (US $617 million). Korean Re is actively discussing different types of coinsurance deals with primary insurers and is planning to expand its reinsurance capacity with the help of its strategic alliance with The Carlyle Group to enhance the growth and profitability of the company’s business.
- Property – Korean Re achieved strong growth across most lines of property insurance in 2022, with premium income from domestic property increasing by 6.7% to KRW 652.1 billion (US$486.3 million). Despite a number of large losses from man-made and natural disasters, the company managed to maintain technical profitability, although the combined ratio before management expenses increased by 3.4 percentage points to 93.2%.
- Energy – In 2022, the Korea Atomic Energy Insurance Pool achieved growth in domestic direct and international reinsurance premiums, with domestic direct premiums of KRW 37.0 billion and overseas inward reinsurance premiums of KRW 22.0 billion. The Protocols to Amend the Paris Convention on Nuclear Third Party Liability, which entered into force in 2022, is expected to drive premium growth in the overseas nuclear business.
- Engineering – Korean Re achieved solid growth and profitability in its domestic engineering insurance business, including Korea interest abroad (KIA), for the fourth consecutive year in 2022, with gross written premiums increasing by 21.8% year on year to KRW 297.7 billion and an underwriting profit of KRW 19 billion.
- Marine and aviation – Marine and aviation reported KRW 349.4 billion in gross written premiums in 2022, a 9.3% increase from the previous year, driven by the introduction of several LNG-fueled vessels and container vessels to large fleets, as well as rate hardening in the Korean market. Cargo premiums soared by 29.2% to KRW 92.6 billion, while aviation premiums declined to KRW 51.6 billion due to non-renewal of coverage. In 2023, premium volume is expected to decrease slightly due to economic woes, while hull premiums are expected to remain stable and aviation premiums to grow by more than 50%.
- Casualty – In 2022, the casualty insurance market in Korea saw a 5.9% increase in premium income, driven by rate increases and demand growth in liability lines, despite a 4.4% decrease in gross written premiums due to withdrawal from underperforming accounts.
- Motor – Korean Re maintained positive top-line growth in 2022, with gross written premiums increasing to KRW 528.7 billion, by focusing on providing reinsurance solutions that better meet the needs of ceding insurers, expanding existing programs and strengthening business relationships with mutual associations. The loss ratio remained mostly stable at 82%. It’s expected that GWP for 2023 will drop by approximately 1.6% and that loss ratio will increase 2.5-3 percentage points due to a weakening of growth momentum, competition of online distribution channels, and the government’s call for a reduction in rates.
- Surety – The domestic surety and credit insurance market maintained a modest growth rate of 2% and a low loss ratio, while premiums decreased by 22% due to increasing retention by primary insurers and a risk exposure reduction policy.
- Agriculture – Korean Re has been a reliable source of reinsurance capacity for the domestic agricultural industry, providing access to global reinsurance capacity and generating gross written premiums of KRW 244.3 billion from crop insurance and KRW 110.2 billion from livestock insurance in 2022. The crop insurance market maintained a stable loss ratio of 54%, while the livestock insurance market experienced a higher loss ratio of 79%. The natural perils insurance market achieved a 61% growth, recording a loss ratio of 30.6%. Despite unfavorable overseas business conditions, Korean Re will prioritize portfolio management in 2023 to deliver profit over top-line growth and promote the growth of the government-sponsored agricultural insurance market.
- Life and health – The Domestic Life & Health Team’s premium income increased by 0.6% and net underwriting results improved by KRW 21.2 billion due to active acquisition of new contracts and a decrease in the loss ratio of medical expense insurance. In 2023, life insurance premiums are expected to decline modestly.
Performance of Overseas Business
The overseas business grew considerably, surging by 17.2% to KRW 2,621.5 billion (US$1.95 billion). A summary of individual lines of business is as follows:
- Life – In 2022, Korean Re maintained a stable volume of overseas life and health business, with gross written premiums increasing by 1%. Despite the uncertainty caused by the COVID-19 pandemic, the company strived to mitigate its effects by diversifying its portfolio and managing risks. In 2023, Korean Re will focus on minimizing profit and loss volatility, while also exploring new business opportunities to provide reinsurance solutions to its customers.
- International Treaty – In 2022, the reinsurance market faced many economic and market challenges. Despite this, Korean Re achieved a 16.8% increase in gross written premiums for the company’s international treaty business. The company achieved its target premium volume by securing solid market growth in various regions, demonstrating a well-balanced and steady expansion.
- International Property – Our international property facultative business has seen robust growth and profitability over the last few years, with gross written premiums increasing from KRW 137.6 billion in 2021 to KRW 154 billion in 2022. We have taken a customized approach to underwriting in different regions, while also tightening our underwriting guidelines and diversifying our portfolio. The current firming of the reinsurance market will likely have a positive impact on both business growth and underwriting margins, although headwinds from the pandemic, catastrophic losses, and potential regulatory changes still remain.
- Engineering – Korean Re has seen a 5.2% year-on-year growth in its international engineering and construction facultative business in 2022 due to improving market conditions and a global construction industry recovery. In 2023, the market is expected to continue growing with delayed projects resuming, and ESG drives increasing the prominence of renewable energy projects.
- International Marine & Energy – In 2022, our international marine and energy business achieved robust growth, with gross written premiums increasing by 11.7% year on year to KRW 53.3 billion. As part of an initiative to embrace the carbon-neutral movement, we expanded our portfolio to include risks related to wind turbine installation vessels and offshore windfarms, resulting in a healthy technical profit of KRW 6.6 billion. Looking ahead, we expect the construction insurance market for upstream energy development projects to grow in 2023, while the market for offshore windfarms is also forecast to grow. We are taking steps to tap into this fast-growing sector and are confident that we can seize on energy transition as a new source of growth opportunities.
Investment
In 2022, despite global economic uncertainty, our total investment income increased by 9.5% to KRW 268.1 billion and the value of our investments grew by 18.7% to KRW 8,504 billion, driven by the issuance of hybrid capital securities and the transfer of assets from two different life insurers. We anticipate that consumption recovery will weaken in 2023, and our asset management strategy will be focused on mitigating potential market uncertainties while maintaining our investment income by increasing the weight of Treasury bonds in our portfolio while decreasing the relative importance of corporate bonds and alternative investments.
Outlook
Korean Re has taken an aggressive approach to expanding their global footprint, setting up four subsidiaries, four branches and four liaison offices in the last six years. They’ve increased their share of overseas business from 23.1% in 2017 to 26.5% in 2022. This diversification of overall portfolio has contributed to stabilizing their underwriting results.
The reinsurer achieved good results in 2022, with growth in domestic and international lines of business, a solid investment return and a successful transition to IFRS 17. The company will continue to expand its global footprint and focus on ESG initiatives, while also preparing for the introduction of K-ICS and IFRS 17. With a strong focus on profitability and diversification, Korean Re is well-positioned to continue to deliver solid results in 2023 and beyond.
