(Seoul=Yonhap Infomax) Soo Yong Lee – South Korea’s life insurance sector will once again be the only segment within the country’s financial industry to receive a reduction in deposit insurance premiums this year.


However, with ongoing discussions on raising the deposit insurance coverage limit and overhauling the overall premium rate and fund system, there are growing calls to adjust the relatively low target fund ratio for life insurers compared to other sectors.


According to the financial industry on the 21st, the Korea Deposit Insurance Corporation (KDIC) has decided to grant a 90% reduction in deposit insurance premiums for the life insurance sector for the 2025 fiscal year.


This reduction is in line with the target fund system of the Deposit Insurance Fund, allowing life insurers to benefit from premium cuts for a second consecutive year following a 90% reduction in 2024.


Financial institutions are required to pay their annual deposit insurance premiums by June of the following year after the premium amount is determined.


In contrast, banks, investment trading and brokerage firms, non-life insurers, and mutual savings banks are not eligible for such reductions.


The reason life insurers qualify for the premium cut is that their contributions have exceeded the lower threshold of the target fund ratio.


The KDIC sets a pre-determined target fund size to ensure the fund can absorb certain losses, and when the fund’s accumulation surpasses this target, premium reductions are granted.


For 2025, the lower limit for the life insurance sector’s target fund ratio is 0.66%, with an upper limit of 0.935%. As the sector’s fund accumulation rate stands at 0.91%, exceeding the lower limit, life insurers are eligible for a 90% premium reduction.


By comparison, the lower limit for banks, investment trading and brokerage, and non-life insurance is 0.825%, while for mutual savings banks it is 1.65%.


Banks’ fund accumulation rate is 0.711%, investment trading and brokerage is 0.6867%, and non-life insurance is 0.6855%—all below their respective lower limits.


Insurance premiums are calculated based on policy reserves and premium income. Due to the long-term nature of life insurance products, life insurers require larger reserves, which is why their target fund ratio is set lower than other sectors.


However, with the recent increase in the deposit insurance coverage limit to 100 million won ($75,000) and upcoming reforms to the premium rate and fund system, the appropriateness of the life insurance sector’s lower target fund ratio is expected to be a subject of debate.


According to the minutes of the Deposit Insurance Committee meeting held in September, KDIC President Yoo Jae-hoon noted that the life insurance account reached its target fund lower limit partly because the target was set lower than other accounts, and that this should be reviewed during the fund system overhaul.


“Life insurers have consistently received premium reductions due to the low target fund ratio,” said a financial industry official. “This aspect should be reviewed when the target limits are restructured.”



sylee3@yna.co.kr


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