On June 28, 2016, the Financial Services Commission
(″FSC″) announced the proposed legislation to partially
amend the Insurance Business Act (″Proposed Amendment″)
with a goal to, among other changes, deregulate insurance
companies' investment protocol and practices.
The Proposed Amendment is expected to be submitted to a plenary
session of the National Assembly in the near future.
Requirements for expanding
insurance product lines clarified, and procedures for holding
As a prerequisite to the FSC's authorization, the Proposed
Amendment clarifies that if a licensed Korean branch of a foreign
insurance company intends to add an insurance product line to its
existing insurance business, the branch must prove that the head
office is engaged in the same insurance business (i.e., insurance
No approval from or report to the Korean regulatory authorities is
required for an insurance company to hold a financial company as a
subsidiary, so long as the required prior registration or approval
to establish and/or become a major shareholder of the financial
company was/were obtained in accordance with the applicable
Deregulation of product
development and asset investment
In most cases, the Proposed Amendment will permit insurance
companies to file the basic insurance product documents to the
Financial Supervisory Service ("FSS") after the launch of
the new product (i.e., ″use and file″).
In exceptional cases, prior filings will be required (i.e.,
″file and use″).
Also, the Proposed Amendment would abolish various asset management
regulations that limit the amount an insurance company can invest
for certain specific asset types (as prescribed by the law).
However, the regulations limiting investments in, or loans made by,
an insurance company to its controlling shareholder and affiliates
must remain unaffected.
Requirement to verify the
appropriateness of policy reserves enhanced.
The Proposed Amendment would require an insurance company to verify
the appropriate amount of its policy reserves by an independent
third party actuary.
introduced – an insurance company (and its agents)
must verify: (i) overlapping coverages on indemnity medical
insurance; and (ii) a system to evaluate the understanding of
product information materials.
The Proposed Amendment imposes administrative fines of up to KRW10
Triggered if an insurance company and
its agents engaged in insurance solicitation fail to comply with
the obligation to verify overlapping coverages for an insurance
applicant on indemnity medical insurance during the solicitation
Also, an insurance company's product information materials will
now be subject to an evaluation system to assess and confirm
consumers' level of understanding of such materials.
Fair competition reinforced
between and among insurance companies and mutual aid
The Proposed Amendment allows the FSC to request other competent
authorities supervising mutual aid organizations. This
enables the FSC to consult on matters not only relating to the
subject products, but also to assess their financial
It also newly establishes related subordinate provisions to allow
the competent authorities supervising mutual aid organizations to
make joint inspection requests to the FSC, if needed, to ensure
their financial soundness.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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