Insurance Business Act and the Supervisory Framework
What this domain tests
Licensing gates, product and solvency supervision, and how the Insurance Business Act (보험업법) splits authority between the FSC (policy) and the FSS (examination and enforcement). Questions typically ask whether a given activity needs approval or only a filing.
Core rules
- Insurance may be written in Korea only by a licensed insurer. Licences are granted by business line - 생명보험 (life), 손해보험 (non-life) and 제3보험 (third-sector: illness, care, accident) - and a foreign insurer operates through a domestic branch (지점) approved by the FSC, with 영업기금 (operating fund) lodged in Korea. A home-state licence confers no passporting rights.
- 기초서류 - policy terms, premium calculation basis, and standard clauses - must be filed before sale, and the FSS can order amendments.
- Solvency is measured by K-ICS, which replaced RBC in 2023, with transitional thresholds stepping up toward the 150% supervisory ratio; breaches trigger 적기시정조치 (prompt corrective action).
- Asset-management limits are set as a share of total assets; 책임준비금 (policy reserves) must be held; reinsurance cessions and major shareholder suitability are supervised.
Worked example
A Cayman reinsurer asks whether it may accept Korean marine cargo risks directly from a Korean manufacturer without a branch. Answer: no. Direct insurance of Korean residents requires an FSC licence and a domestic branch; the permissible route without a branch is reinsurance ceded by a licensed Korean insurer, documented and reported under the relevant foreign-exchange and supervisory rules.
Traps that cost marks
- Confusing 신고 (report/filing) with 인가 (approval) - selling before a filing is complete is a violation even if the product is sound.
- Treating the 150% K-ICS ratio as immediately binding when transitional thresholds apply.
- Assuming FSS notices and supervisory regulations are merely guidance; they bind as supervisory standards.