Authored by HyoBae Kim, Head of Business APAC, RNA Analytics
South Korean actuaries face significant pricing pressures driven by evolving regulatory requirements, demographic shifts and economic uncertainty.
A surge of regulatory reforms has transformed the insurance landscape, introducing significant operational, technological and actuarial challenges for insurers globally – and South Korea is no exception.
South Korea was one of the few countries to implement both IFRS 17 and K-ICS simultaneously. This dual adoption intensified compliance demands, pushing insurers to adapt to a highly complex regulatory environment.
These regulatory changes have not only increased operational complexity but have also had far-reaching implications for insurers’ financial strategies and risk management, with some appearing to have made errors in reporting results under the new frameworks – highlighting ongoing implementation challenges that persist even two years after adoption.
Korea is now officially classified as a ‘super-aged society’ – one in which those aged 65 and above comprise over 20% of the population, and at a pace of aging unmatched globally. This demographic shift poses unique challenges for life insurers, who must adapt their products and risk management strategies to meet the needs of this older population.
As the proportion of people aged 65 and over – reaching 10.24 million in December 2024 – continues to increase rapidly, South Korean life insurers are under mounting pressure to innovate in product design, strengthen their capital positions, and ensure robust compliance with new regulatory frameworks. At the same time, Korea’s persistently low birth rate has led to a shrinking working-age population, reducing premium base while increasing claims exposure for life insurers. Under IFRS 17 and K-ICS, these demographic shifts are compounded by stricter requirements for liability valuation and risk-based capital, making it even more challenging to manage long-term guarantees and interest rate risks associated with traditional life policies.
While demographics reshape long-term product needs, short-term profitability is increasingly pressured by macroeconomic volatility. South Korea is facing a series of economic and interest rate-related headwinds, with the central bank considering deeper interest rate cuts this year, as Asia’s fourth-largest economy grapples with the risk of recession, while global trade frictions with the US escalate. This has knock-on effects on liability valuation under IFRS 17, as well as investment return assumptions and product profitability.
For actuaries, this means pricing challenges resulting from longevity risk and product mix shifts, as well as growth and profitability. And with rapid aging, longer life expectancy, and low fertility rates placing pressure on the working age population, actuaries must reassess mortality and longevity assumptions; price for extended payout periods on annuities and pensions; and manage increasing healthcare costs. At the same time, these demographic changes are expected to bolster demand for products such as whole-life and pension insurance, requiring actuaries to develop new pricing models for senior-focused products. These changing dynamics also demand that carriers address protection gaps, and balance profitability with affordability for older demographics.
In addition to these market-specific pricing hurdles, the ongoing implementation of IFRS 17 continues to create pricing challenges around discount rate volatility affecting liability valuations; contractual service margin management; and revenue recognition timing impacts on profitability assessment.
All these pressures combine to create a complex pricing environment where South Korean actuaries must balance traditional actuarial principles with rapidly changing market conditions and regulatory requirements.
Meanwhile, market watchers note that the combination of lower discount rates (required under IFRS 17 and K-ICS) and stricter actuarial assumptions have somewhat squeezed capital buffers.
According to a June 2025 briefing note from Fitch Ratings, South Korean insurers saw a modest increase in net profit in 2024, largely driven by strong investment returns. This growth occurred despite a decline in insurance profits from non-recurring items following regulatory changes, underscoring how investment strategies have helped offset weaker underwriting results and the costs associated with regulatory transition.
Looking ahead, Fitch expects Korean insurers’ capitalisation to come under pressure from falling interest rates and regulatory tightening, including liability discount rate cuts and actuarial assumption adjustments. The ratings agency notes that insurers are narrowing duration gaps, extending liability duration, and investing in long-term fixed-income securities and using derivatives in their efforts to mitigate interest rate risk.
Insurers’ average K-ICS ratio, including transitional measures, fell to 197.9% in 1Q25 (from an average 206.7% in 2024). Notably, the regulator reduced the K-ICS ratio benchmark from 150% to 130% in June 2025. The ratings agency said in its briefing note that it did not expect further actuarial assumption adjustments in the second half of the year, which, it said, could ease financial pressure on insurers.
Despite these obstacles, stable insurance profits are expected from CSM release, although volatility in investment returns remains a risk – as it does for insurers across the globe in the current environment.
All these dynamics underscore the increasingly critical role of actuarial judgment in navigating Korea’s complex insurance environment. As regulatory, demographic and macroeconomic forces converge, actuaries are uniquely positioned to navigate volatility, challenge assumptions, and shape strategic decisions that secure solvency, profitability and long-term resilience.