Life Insurers Express Concerns Over Financial Burden from Reduced Issuance of Ultra-Long-Term Bonds

Life insurance companies have conveyed to financial authorities that the reduction in the issuance of ultra-long-term government bonds could increase their financial soundness burden. Concerns have been raised that a decrease in the supply of ultra-long-term bonds may impact asset-liability management (ALM) plans. While life insurers stated that a reduction in issuance volume is acceptable, adjustments beyond the anticipated range could pose a burden. Ultra-long-term bonds are necessary to match the maturities of assets and liabilities in line with long-term insurance contracts. The government has proposed that the proportion of bonds issued with maturities over 20 years should be 35%±5%, and life insurers are planning to purchase long-term bonds in accordance with this range. However, if the issuance is reduced, insurance companies may compete to secure the necessary volume, which could lower the interest rates on long-term bonds. Conversely, if market interest rates decline, the discount rate used for evaluating insurance liabilities may also decrease, potentially lowering the solvency ratio (K-ICS). Financial authorities are demanding that insurance companies manage their interest rate sensitivity, and regulations on duration gaps are set to be introduced in 2027. Discussions on ultra-long-term bonds are related to the global rise in long-term interest rates, with the domestic 30-year government bond rate recently surpassing 4.7%.

This content is provided for general informational purposes only and doesn't constitute financial, investment, legal, or tax advice. Any events, rewards, online promotions, or related information mentioned herein should not be considered a recommendation, solicitation, or invitation to purchase, sell, trade, or otherwise deal in any crypto assets. Crypto assets are highly volatile and may result in loss. The availability of WEEX services, products, and related events may vary by region. You are responsible for ensuring that your participation is in accordance with applicable local laws and regulations.