FSS Discusses Exchange Rate Volatility Response with Insurance Firm CFOs

The Financial Supervisory Service (FSS) held an emergency meeting with the chief financial officers of major insurance companies to discuss responses to recent sharp exchange rate fluctuations and requested cooperation for market stabilization. The meeting on the 10th was attended by Deputy Governor Seo Young-il, who oversees insurance, and the chief financial officers (CFOs) of 14 major insurance companies.

Deputy Governor Seo urged insurance companies to comprehensively consider their financial soundness and liquidity when making new overseas investments. He also emphasized that speculation based on the expectation of a rising exchange rate should be refrained from, and that maturities of financial products designed to reduce exchange rate risk should be diversified to avoid bunching up. Furthermore, he added that insurance companies must possess sufficient loss-bearing capacity, as other investment methods like overseas private debt funds carry the risk of losing invested capital during unfavorable economic conditions.

The FSS ordered insurance firms to thoroughly explain the exchange rate fluctuation risks when selling dollar-denominated insurance policies, ensuring consumers do not mistake them for currency appreciation investment products, and to strictly manage adherence to suitability principles. The initial premiums for dollar-denominated policies decreased from an average of 233.5 billion won per month in January-March to 152.8 billion won in April and 112.4 billion won in May.

The FSS plans to closely monitor the foreign exchange risk management status of each insurance company in preparation for renewed market volatility and to enhance insurers' crisis response capabilities through measures like foreign currency liquidity stress tests.