South Korean insurance industry is projected to grow at a compound annual growth rate (CAGR) of 3.5% from KRW220.5 trillion ($186.8bn) in 2020 to KRW262.5 trillion ($229.5bn) in 2025, in terms of direct written premiums, forecasts GlobalData, a leading data, and analytics company.

Anjuli Srivastav, Insurance Analyst at GlobalData, comments: “After growing by 4.2% in 2020, the industry is expected to contract by 0.4% in 2021. The decline is mainly driven by life insurance segment, which is expected to contract by 2.5% due to the persistent low-interest-rate environment, reduced disposable income due to the COVID-19 pandemic, and an aging population.’’

Life insurance accounted for 54.0% of the industry’s direct written premiums (DWP) in 2020. The segment is expected to revive in 2022 and grow by 1.9%, driven by post-pandemic economic recovery and increased awareness, which will boost the demand for health insurance products.

Srivastav continues: “Maintaining strict solvency and capital requirements for annuity insurance products under the upcoming IFRS-17 and K-ICS regulations will prompt insurers to shift their focus towards protection-type products over the next few years. As a result, life insurance is expected to grow at a CAGR of 1.6% during 2020-2025.”

General insurance segment accounted for the remaining 46.0% of the DWP in 2020. The segment grew by 7.0% in 2020, driven by an increase in motor premiums and improved underwriting performance of general insurers. However, it is expected to witness a slower growth of 3.8% in 2021 due to the economic impact of the pandemic.

South Korean insurers’ have also taken initiatives to divest from high-risk non-renewable energy projects and invest only in renewable energy projects, which is expected to support their underwriting performance in the coming years.

In June 2021, insurers like Hyundai Marine & Fire Insurance, Hana Insurance, DB Insurance, and Hanwha General Insurance pledged to stop providing construction and operational insurance coverage to any new coal projects.

Srivastav concludes: “The outlook for the South Korean insurance industry looks positive driven by economic recovery, increased investments by insurers in digital transformation, ESG related initiatives, and positive regulatory environment.”