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A Study of the Boundary Setting of Insurance Group-wide Supervision - Based on IAIS Insurance Core Principles -
Journal of Insurance and Finance
2012, 23(4),
pp.133-169
Publisher : Korea Insurance Research Institute
Research Area : Business Management
Publisher : Korea Insurance Research Institute
Research Area : Business Management
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The International Association of Insurance Supervisors(IAIS) notices,after the financial crisis of 2008, that the financial stability of a insurance company can be negatively affected if the company is related with non-insurance and/or non-traditional insurance activities via ownership. IAIS currently discusses methods to close the supervisory loopholes in group-wide supervision. All the methods start with defining the insurance group. In Korea, financial groups are not supervised except ‘financial holding company’ structures, which are legally defined in ‘Financial Holding Company Act’ of 2000. Since most of insurance companies are not under statutory financial holding company, there are insufficient group-wide supervision on the insurance companies in groups in Korea. The first step is defining the insurance group in the context of group-wide supervision, based on IAIS Insurance Core Principle(ICP). ICPs are principles, lack of details and country-specificities. This article studies ways to set boundaries of insurance groups in Korea to enhance financial stability, considering the legal and economic environment. We divide the group structures into ‘loose group structure’ and ‘holding company structure’, and further classify the holding company structure into ‘non-operation holding company form’, ‘operation holding company form’, and ‘foreign-based holding company form’ according to the characteristic of the holding company. Especially for loose group structres, in which most of the large insurance companies are included, we suggest standards and necessary conditions to form primary and secondary insurance groups.
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