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| Shinhan Life Insurance's headquarters in central Seoul / Captured from website |
The Korean-Insurance Capital Standards (K-ICS), set to go into force in 2023, applies stricter standards on the financial health of insurers, which calls for them to increase their capital base.
Insurers need to secure additional capital for the real estate they own for the case where the price of the real estate falls. Under the new standards, insurers will need to hold 2.5 billion won for a real estate property worth 10 billion won, up from the 900 million won they are currently required to have.
Shinhan Life Insurance is looking to sell "L Tower," the building where its headquarters are located in central Seoul. A Shinhan Life official said Monday the company is not in a position to comment, but expectations in the industry are that Shinhan Financial Group's affiliate investing in real estate, Shinhan Reits Management, is set to take over the building.
This comes after Hyundai Marine & Fire Insurance selected Korea Real Estate Investment & Trust as the preferred bidder for the sale of its building in southern Seoul at 360 billion won in June.
Hanwha Life Insurance is in the process of selling its buildings in Seongnam in Gyeonggi Province, Incheon and Busan. An unsuccessful public bidding was held for the three buildings in March. Hanwha sold another building in Seongnam in 2018.
Kyobo Life Insurance has put its building in Pyeongtaek up for sale and sold two buildings, in Incheon and Chungju, North Chungcheong Province, in 2018.
Data from the Financial Supervisory Service shows the value of real estate owned by 24 life insurers in the first quarter of this year stood at 12.47 trillion won, which is down 0.9 percent from the value of the same period a year earlier.
This is attributed to insurers' sale of buildings ahead of the introduction of K-ICS.
"The sale of real estate assets takes into consideration various factors including new accounting standards," a Kyobo Life official said. "The sale is also attributed to the declining value of buildings in old business districts and the need to relocate to new business centers."
He noted overall real estate assets are decreasing.
A Hanwha Life official said "The sale is part of strategic decisions based not only on K-ICS, but the consideration of the value of buildings in provincial areas."
Meritz Fire & Marine Insurance sold its building on Yeouido to Vestas Investment Management for 120 billion won last year.
Samsung Life Insurance sold its building on Yeouido to BNK Asset Management at 270 billion won.
Speculations were raised that Samsung Life is planning to sell the A tower of its building in southern Seoul after employees working there were relocated to a We Work location nearby. An official said Monday the company does not have plans to sell the A tower.
