[비즈한국] MG Non-Life Insurance, an insolvent financial institution, is facing liquidation. Financial authorities announced on the 14th that they would suspend MG Non-Life Insurance's new operations and establish a bridge insurance company to transfer existing insurance contracts. As the government stated that personnel reductions are inevitable during the transfer process to the bridge insurer, the labor union, which had opposed a sale citing job security, lashed out at the decision, calling it "no different from a death sentence."
New contracts prohibited; insurance contracts to be transferred to 5 major non-life insurers
The Financial Services Commission, the Financial Supervisory Service, and the Korea Deposit Insurance Corporation decided at a regular meeting on May 14 to partially suspend MG Non-Life Insurance's operations, prohibiting the signing of new insurance contracts. As of March, MG Non-Life Insurance held 1.51 million insurance contracts (approximately 1.21 million individual policyholders and 10,000 corporate clients), about 90% of which are long-term insurance products. All of MG Non-Life Insurance's contracts will be transferred to the top five domestic non-life insurers (DB Insurance, Meritz Fire & Marine000060, Samsung Fire & Marine000810, KB Insurance, and Hyundai Marine & Fire001450) without changes to the terms.
Authorities introduced a plan to establish a "bridge insurance company" to stably manage the insurance contracts before transferring them to the five major insurers, considering that the process, including IT integration, would take more than a year. The bridge insurance company will be established by the Korea Deposit Insurance Corporation and will utilize the existing MG Non-Life Insurance headquarters. Once the contract transfer to the bridge insurer is complete, the MG Non-Life Insurance corporate entity will undergo liquidation procedures.
Financial authorities have prohibited MG Non-Life Insurance from signing new insurance contracts (excluding re-enrollments and automatic renewals) and changing the terms of existing contracts (such as increasing coverage amounts, changing insurance types, extending policy periods, or adding limited coverage) for six months, from 12:00 AM on May 15 to 12:00 AM on November 14. There will be no changes to the collection or payment of premiums, and the status of existing policyholders will be maintained.
The MG Non-Life Insurance joint management team announced, "We will complete the first transfer of all contracts to the bridge insurance company in the second or third quarter, and move all contracts to the five major non-life insurers once the IT system is ready. Since there are no changes to coverage details or maturity dates, you will receive the same insurance services as before in accordance with the terms and conditions." The Financial Services Commission specified the final contract transfer period for the fourth quarter of 2026.
MG Non-Life Insurance received management improvement recommendations in 2018 and management improvement orders in 2019, but as it failed to meet the improvement requirements, it was designated as an insolvent financial institution in April 2022. It filed an administrative lawsuit against the Financial Services Commission to reverse this, but ultimately lost the case this past January.
MG Non-Life Insurance's Risk-Based Capital (RBC) ratio (an indicator showing whether an insurer can pay insurance claims to customers on time) stood at 4.13% as of the end of 2024, far below the financial authorities' recommended level of 150%. The Korea Deposit Insurance Corporation, judging that self-led management normalization was impossible, pushed for the sale of MG Non-Life Insurance, but after Meritz Fire & Marine—the preferred bidder selected last March—gave up on the acquisition, the financial authorities decided to wind it down themselves.
Looking at past bridge savings bank cases… Job security remains difficult
While the plan to protect insurance policyholders is settled through the establishment of a bridge insurer and contract transfers, friction over employment is expected to continue. Financial authorities announced that out of the 521 MG Non-Life Insurance employees, only those necessary for the operation of the bridge insurer and the maintenance and management of existing contracts would be hired by the bridge company. This will focus on essential personnel such as IT operations, insurance claim payments, and contract transfer preparations, with the scale of recruitment to be determined during the establishment process. Even among those transferred to the bridge insurance company, only some will be provided with opportunities to move to the five major non-life insurance companies.
For the 460 exclusive agents of MG Non-Life Insurance, the General Insurance Association of Korea will lead efforts to arrange transfers to the five major non-life insurers or other insurers of their choosing. Support will be provided so that they can continue to receive commissions and allowances based on existing contracts if they continue managing MG Non-Life Insurance contracts after their transfer.
The Korea Deposit Insurance Corporation has utilized bridge savings banks in the process of normalizing insolvent savings banks since the early 2000s. The process involves transferring the contracts of insolvent savings banks to a bridge savings bank to maintain financial transactions while simultaneously seeking a buyer from the early stages of operation. When a bridge savings bank is established, the Korea Deposit Insurance Corporation injects public funds to cover bad assets and later recovers those funds through a sale.
Looking at past cases of cleaning up insolvent savings banks, restructuring at MG Non-Life Insurance seems inevitable. For instance, at the end of 2012, financial authorities transferred the contracts of Gyeonggi Savings Bank and W Savings Bank to bridge banks called YeHansol and YeSeong Savings Banks, respectively. At the time, only some of the employees from Gyeonggi and W Savings Banks were hired by the bridge banks after interviews, and these positions were maintained only until the sale. The number of employees at the bridge banks was only about half that of the insolvent savings banks, creating inherent limits for job transfers.
It also took considerable time to recover public funds by selling bridge savings banks. In February 2014, the Korea Deposit Insurance Corporation selected preferred bidders for the sale of four bridge savings banks—YeSeong (Korea Investment Holdings), YeNarae and YeJu (A&P Financial), and YeShin (Welcome Credit Line)—which had been established between 2010 and 2013, meaning it took up to four years to complete the sales.
The MG Non-Life Insurance labor union immediately protested the financial authorities' decision. The Korean Financial Industry Union stated on the 14th, "For the past several months, we have demanded a normal sale to ensure job security for employees and agents and to protect policyholders. This resolution is no different from a death sentence for MG Non-Life Insurance workers. Offering to hire a few as if doing a favor is just telling colleagues to engage in a survival game against each other." They added, "We will continue to fight until measures for a proper sale are taken by the next administration."
Kwon Dae-young, Secretary General of the Financial Services Commission, explained during an emergency briefing held on the 14th regarding the union's backlash and job security, "We ask MG Non-Life Insurance employees to cooperate so that the contract transfer can proceed smoothly for the sake of the policyholders." He added, "The government has also agonized greatly over the employment issue. Since there are constraints on the five major non-life insurers taking over contracts and using the deposit insurance fund, we will make a rational decision."