As IFRS 17, a new accounting standard for insurance contracts, is scheduled to be adopted in 2021, Korean insurers' move to issue subordinated debts/hybrid capital
securities or increase paid-in capital is gaining traction.

This is aimed at building up more capital to stave off the impact of the IFRS 17 adoption regarding insurance liabilities that will be subject to market valuation under the new standard and thus drastically increase in size.

On 26 May 2017, Hyundai Marine & Fire Insurance(Hyundai) issued KRW 500 billion of subordinated debts to raise its risk-based capital (RBC) ratio by 23.3%p to 183.1%. Dongbu Fire & Marine Insurance (Dongbu) also completed the issuance of subordinated debentures worth KRW 499 billion two days earlier, which caused its RBC ratio to rise by 20.1%p to 198.6%.

In fact, the amount of debts issued by Hyundai and Dongbu was 1.67 times and 1.25 times larger than originally planned, respectively. Nevertheless, their
issuance was a resounding success, largely owing to investors' positive view towards subordinated bonds as high-yielding safe assets.

Meanwhile, Hanwha Life issued 30-year hybrid debt securities worth KRW 500 billion in mid-April 2017, and NH Life issued KRW 500 billion of subordinated
debentures later that month. The recent uptrend in subordinated bonds/hybrid securities issuance by local insurers indicates that their need for capitalization is
being matched up with institutional investors' demand for high-yield, long-term bonds in the capital markets.

Korean Reinsurance Company published this content on 14 July 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 14 July 2017 15:49:09 UTC.

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