Korean Re Signed a Coinsurance Agreement with Shinhan Life
In December 2021, Korean Re entered into a coinsurance agreement with Shinhan Life to help the life insurer manage its assets and liabilities based on economic value. As the first coinsurance business that we have assumed, the agreement is expected to give rise to a raft of new business opportunities for us going forward.
Over the last year, Korean Re analyzed the business portfolios of Shinhan Life to figure out the best possible way to meet the life insurer’s needs. The recently signed the agreement will lead to individual transactions collectively worth up to KRW 500 billion. Shinhan Life had been seeking to make use of coinsurance arrangements as an asset and liability management (ALM) tool, and its coinsurance deal with Korean Re will help mitigate its financial risks resulting from a mismatch of assets and liabilities.
Coinsurance allows primary insurers to transfer all risks associated with the insurance policies they issue, including underwriting risk and interest rate risk, to reinsurers, as opposed to the traditional reinsurance structure where investment risk is not transferred.
Korean Re will continue to deepen its cooperative business relationship with Shinhan Life as both parties agreed to keep working together to expand the scope of business to be ceded under coinsurance deals. In other words, the recent coinsurance agreement is expected to help set the stage for both companies to increase bilateral transactions over the long term.
Building on the success of its first coinsurance business, Korean Re will seek to lead the growth of the domestic coinsurance market. While we remain committed to providing traditional reinsurance arrangements, we will continue to develop a wide range of coinsurance solutions not only for local life insurers but also for overseas insurers.
Since July 2020, Korean Re has formed a strategic alliance with The Carlyle Group, one of the top private equity fund managers in the world in a bid to to provide coinsurance solutions and related services to insurance companies in Korea. Both parties are working closely together to develop coinsurance solutions that are best suitable for primary insurers in the domestic market. The bilateral cooperation covers a wide range of areas from product design, structuring, and pricing to reinsurance asset management, required capital management, and new capital funding.