Korea

Principal Legislation

• The Insurance Business Law of January 1962, revised in 1977, 2003 and 2011
• The Medical Insurance Act of December 1963 and 1997.
• The National Pension Act of 1986.
• The National Health Insurance Act of 1999.
• The Employee Retirement Security Act of December 2004.

Supervision

There are two financial sector regulators, the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS). The FSC was established on 1 April 1998, and the FSS on 1 January 1999. In broad terms the FSC deals with the public policy aspects of insurance supervision, such as legislation and the granting and revoking of insurance licences, whilst the FSS deals with administrative matters such as financial supervision, product approval and arbitration of insurance-related disputes.

Admitted / Non-admitted

There are no legal restrictions on placing business with non-admitted reinsurers and no requirement for foreign reinsurers to put up deposits or collateral. There are no withholding taxes or other deductions from reinsurance premiums ceded abroad.

Compulsory Classes

• Compulsory automobile liability (CALI).
• Third party liability for gas accidents.
• Third party liability for sports centres, recreational facilities and gymnasia.
• Third party liability for schools, children’s play areas and kindergartens.
• Third party liability for pleasure craft.
• Road hauliers’ liability.
• Household removers’ liability.
• Third party liability for space launches and satellites.
• Nuclear liability.
• Marine pollution liability.
• Fire and liability for third party bodily injury caused by fire for buildings above 15 storeys, places of public entertainment and other publicly accessible buildings.
• Third party liability for spread of fire in multi-tenure buildings.
• Product liability for “hybrid” manufactures
• Workers’ compensation (state scheme).
• Personal accident insurance for students and part-time assistants working in university laboratories.
• Foreign workers’ guarantee insurance in respect of unpaid wages.
• Foreign workers’ return cost insurance.
• Foreign workers’ non-work-related accident insurance.
• Professional indemnity for foreign insurance brokers and agencies engaged in cross-border sales.
• Security for insurance brokers (cash deposit, bond or professional indemnity insurance).

State Involvement

The Korea Export Insurance Corporation (KEIC) is the only state owned company.

Tariff Classes

There are no statutory tariffs.

Premium Taxes and Charges

Insurers pay stamp duty of KRW 100 each policy document issued.

Policy Language

Mass-market policies are always written in the Korean language but commercial policies are frequently written in English.

The Korean non-life direct market comprises 10 domestic multiline insurers, three direct motor writers, two state-owned credit insurers and eight foreign branches or subsidiaries. Insurance is also underwritten by the Post Office and around 70 co-operatives which are mainly active in the agriculture, fishing and small business sectors.

Korea has a diverse reinsurance market, comprising a listed national reinsurer and seven foreign branches. Despite the loss of its statutory reinsurance monopoly in 1997, the national reinsurer continues to dominate the local non-life market. The national reinsurer is the leading source of proportional capacity and has an important role in developing and rating new classes of casualty insurance. It is also the leading life reinsurer, though with a much lower market share.

Insurance distribution is mainly in the hands of agents, solicitors and the insurance companies’ in-house production departments. Sales in the life market had long been dominated by direct sales forces, whose members are known as “solicitors”, who work for one life company on a commission basis and are traditionally self-employed, rather than employed by the life offices.

Korea is generally regarded as having a low exposure to earthquake. The country’s earthquake hazard derives from its proximity to the circum-Pacific earthquake belt which passes through neighbouring Japan. Typhoons and accompanying floods are the most serious natural hazards in Korea. The most exposed area is the southern and south-eastern tip of the peninsula.