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JC Partners poised to threaten Korean Re with KDB Life

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KDB Life Insurance headquarters in Seoul / Korea Times file
KDB Life Insurance headquarters in Seoul / Korea Times file

By Park Jae-hyuk

JC Partners has drawn keen attention from market observers here, who are wondering whether transforming KDB Life Insurance into a reinsurer could affect the Korea Reinsurance Company's (Korean Re) dominant market share.

The private equity firm (PEF) led by Orix Private Equity's former Korean office head Lee Jong-chul was selected as the preferred bidder for the KDB Life takeover, Tuesday.

It has been expected that the PEF would enter into a competition with Korean Re, taking advantage of the financial regulator's recent deregulatory measures on the domestic reinsurance industry.

According to industry sources, JC Partners has sought to change KDB Life into a reinsurance firm after closing the acquisition deal estimated at around 550 billion won ($458 million).

Woori Bank said it made a 100 billion won investment in a PEF that JC Partners manages for the KDB Life takeover, because the bank expects a rise in KDB Life's valuation, following the life insurer's transition into a reinsurance company.

JC Partners' strategy came as the Financial Services Commission (FSC) announced its plan to ease regulations on the reinsurance industry.

According to the regulator, the minimum equity requirement for a reinsurer will go down to 10 billion won from 30 billion won. In addition, reinsurers will not be subject to regulations imposed on general insurers.

"Competition is expected to heat up in the reinsurance market with newly established reinsurance companies," an FSC official said.

Given that Carlyle Group has been said to consider investing in JC Partners, the local PEF could become a more severe threat to Korean Re that holds over a 57 percent share in the domestic reinsurance market.

After acquiring a 19.9 percent stake in DSA Reinsurance Company from AIG in 2018, Carlyle has expanded its presence in the insurance industry worldwide. Its Asia Partners advisory team managing director John Kim also said his company seeks to build its presence in Korea.

But still, there exist concerns that JC Partners would face difficulties in building up enough experience and capital for the reinsurance business in the near future.

Industry officials noted the buyout firm will need huge capital for risk-taking, if it wants to compete with Korean Re and foreign reinsurance companies.

"A reinsurer should be able to take risks from all insurers it signed with," an insurance industry official said. "Although the current minimum equity requirement stands at 30 billion won, reinsurers need at least 300 billion won to 500 billion won for stable management."


Park Jae-hyuk pjh@koreatimes.co.kr


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