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[Editorial] Listing Life Insurance Companies on the Stock Market

[Editorial] Listing Life Insurance Companies on the Stock Market

Posted April. 28, 2007 03:07,   


The Financial Supervisory Service approved draft regulations on the listing of companies yesterday that allow life insurance companies to be listed on the stock market. This will enable those companies to enhance their financial health by increasing their capital, increasing their size, and globalizing their management. Major overseas life insurance firms successfully increased their size and competitiveness by being listed on the stock market when they were in the red, and produced larger profits by restructuring their businesses and diversifying their management.

The Korean financial sector entered an era of boundless competition. If the Korea-U.S. FTA takes effect, national borders will blur. Also, if the National Assembly approves the pending Capital Market Integration Law, the financial sector will become more consolidated. Life insurance companies will be able to secure capital, which is necessary for competition with banks, securities companies, and foreign life insurers.

The discussion on listing life insurance companies emerged in 1989. But the authorities suspended the move three times in the face of opposition or demands from civic groups and the political circle. The issue has been settled after 18 years largely thanks to FSS Chairman Yoon Jeung-hyun. He has said, “It is the government’s fault that life insurers have not been listed. It should be done according to the law and economic principles.” The advisory commission on the listing of life insurance companies concluded earlier this year said, “Domestic life insurance companies are public companies. Therefore, they do not need to distribute proceeds from listing on the stock market to insurance policy holders.” This settled the issue of distributing “insurance policy holders’ share” of the possible proceeds. Meanwhile, Yoon induced the promise of donating 1.5 trillion won of public funds over the next 20 years from life insurers as part of their effort to fulfill their social responsibility.

Of course, not everyone agrees with that. Some point out that the amount of pledged public funds is not enough. Some civic groups, who demand listed life insurance companies distribute proceeds to insurance policy holders filed a complaint against Yoon and chairman of the advisory committee Nah Dong-min for abusing their authority. Some lawmakers have also submitted a draft revision of the insurance business law to the National Assembly, which includes distribution of proceeds from the listing to insurance policy holders.

The listing of life insurance companies should not be blocked by such obstacles. But the life insurance industry should not consider the listing as a convenient tool for increasing their profits. The industry will lose ground unless it enhances its competitiveness to meet the global standard.