KDIC chief says fund target reset underway, acknowledges insurance industry concerns

Korea Deposit Insurance Corporation President Kim Sung-sik said Monday that preliminary research results are in hand and that the agency is holding working-level and expert consultations with relevant industry sectors as it prepares to reset the target fund size for each deposit insurance sector. Asked about complaints that the proposed premium rate hikes for insurers are too steep, Kim said he is aware of the pushback and that the agency is actively discussing the matter internally.

Kim made the remarks at the National Assembly's Political Affairs Committee national audit of the Financial Supervisory Service and other agencies, responding to questions from committee chairman Yoo Dong-su of the Democratic Party of Korea. He added that the agency is working hard to gather broad industry input and find common ground.

Yoo said the current level of deposit insurance fund reserves falls far short of what is needed to cover future insolvency risks. According to KDIC data Yoo released, the fund accumulation ratio — the ratio of accumulated funds to insured deposits — stood as of end-2025 at 0.7318% for banks, 0.5529% for financial investment firms and 0.5342% for non-life insurers, all below the lower bound of the current target accumulation rate, which was adjusted downward following the creation of a special account. The savings bank sector posted a negative ratio of minus 2.1346%. Only life insurers, at 0.9003%, exceeded the lower bound, though they still fell short of the upper bound.

Yoo said the shortfall compared with the original target accumulation rate introduced in 2009 amounts to 42.8 trillion won ($31.9 billion) against the upper bound and 26.5 trillion won against the lower bound. He called for a comprehensive reset of the fund target that takes into account 17 years of changes in the financial environment and sector-specific characteristics since the target fund system was introduced.

The central issue is the burden on the insurance sector. The KDIC's research proposal calls for raising the deposit insurance premium rate for both life and non-life insurers from the current 0.15% to 0.40% and 0.50% respectively — increases of 166.7% and 233.3%, or roughly 2.7 and 3.3 times the current rate. Both figures are substantially higher than the rates proposed in a Financial Services Commission report last September, which put the increases at 0.171% for life insurers and 0.154% for non-life insurers.

Yoo said that under the research proposal, life insurers would face an additional burden of 927.1 billion won and non-life insurers 572.6 billion won, equivalent to 18.7% and 7.9% of their respective net profit for the period, and 0.73% and 0.41% of premium income. Yoo also noted that the underlying data behind the research have not been made public, saying there appears to be little reason to withhold them. Kim said the agency would conduct additional review to determine whether the detailed data could be shared with the industry.

The committee also raised concerns about the impact of the scheduled expiration of the special account for savings bank restructuring. Kim said that if the special account is not extended, a negative balance of 3.5 trillion won — comprising 1.5 trillion won ($1.12 billion) plus an existing 2 trillion won — would remain in the savings banks' general account by year-end, and expressed concern about what would happen if savings bank insolvencies occurred in the interim. The special account's total equity in the KDIC fund settlement stands at negative 2.95 trillion won.