Plan to merge ailing insurers with Korea Life via P&A under review

The government is carefully reviewing a proposal that would allow Korea Life Insurance, which previously received an injection of public funds, to take over three non-performing life insurance companies under a purchase of assets and assumption of liabilities (P&A) formula. The three insurers are Samshin, Hyundai and Hanil Life.

A Finance-Economy Ministry official announced Wednesday that the government is considering the proposal as an alternative to placing them under the control of a government-led financial holding company ahead of their sell-off.

¡°In case of an insurance company, there are generally severe difficulties in liquidation, since a substantial part of the insured amount should be paid to any policy holders after a certain period of time, which is different from the case of a bank liquidation," he said. "Considering the characteristics of the insurance business, it¡¯s desirable for the private sector to deals with the problems.¡±

The official said that placing the insurance companies under a financial holding company after undertaking a public funds injection was under review as a last resort.

The Financial Supervisory Commission announced late last year that it intended to establish a financial holding company under which to incorporate nonviable insurers.