Lotte Insurance headquarters in Jung-gu, Seoul. [Photo provided by Lotte Insurance]
South Korea’s financial regulators plan to step up prompt corrective action against Lotte Insurance to a management improvement demand after rejecting the insurer’s turnaround plan.
The Financial Services Commission said it disapproved Lotte Insurance’s management improvement plan, submitted on Jan. 2, at a regular meeting on Tuesday. The FSC said the plan lacked specificity, feasibility and supporting grounds.
After a prior-notice process, the company’s current management improvement recommendation is expected to be upgraded to a management improvement demand. Prompt corrective action has three levels: recommendation, demand and order.
If a management improvement demand is imposed, regulators can require steps such as replacing executives, partially suspending insurance business, reducing staff and organization, limiting or disposing of risky assets, and restructuring subsidiaries. They can also restrict branch closures, mergers or openings, or require the company to draw up a sale plan. Measures that were previously only recommended — including raising capital, cutting business expenses, disposing of bad assets, restructuring staff and organization, limiting dividends — can also be required.
After receiving a management improvement demand, Lotte Insurance must submit a revised plan within two months. If regulators also reject that plan, the action could be escalated to a management improvement order, the highest level.
Industry observers said the rejected plan likely did not sufficiently address a capital increase sought by regulators. Lotte Insurance has said its ability to raise capital on its own is limited because any capital increase is decided by its largest shareholder, JKL Partners.
If the corrective action is upgraded, Lotte Insurance may again pursue legal action. When it received a management improvement recommendation in November last year, it filed a lawsuit seeking to overturn the measure and also sought an injunction at the Seoul Administrative Court. The injunction request was denied.
A financial regulator said authorities will “review necessary follow-up measures in accordance with laws and principles.”
The Financial Services Commission said it disapproved Lotte Insurance’s management improvement plan, submitted on Jan. 2, at a regular meeting on Tuesday. The FSC said the plan lacked specificity, feasibility and supporting grounds.
After a prior-notice process, the company’s current management improvement recommendation is expected to be upgraded to a management improvement demand. Prompt corrective action has three levels: recommendation, demand and order.
If a management improvement demand is imposed, regulators can require steps such as replacing executives, partially suspending insurance business, reducing staff and organization, limiting or disposing of risky assets, and restructuring subsidiaries. They can also restrict branch closures, mergers or openings, or require the company to draw up a sale plan. Measures that were previously only recommended — including raising capital, cutting business expenses, disposing of bad assets, restructuring staff and organization, limiting dividends — can also be required.
After receiving a management improvement demand, Lotte Insurance must submit a revised plan within two months. If regulators also reject that plan, the action could be escalated to a management improvement order, the highest level.
Industry observers said the rejected plan likely did not sufficiently address a capital increase sought by regulators. Lotte Insurance has said its ability to raise capital on its own is limited because any capital increase is decided by its largest shareholder, JKL Partners.
If the corrective action is upgraded, Lotte Insurance may again pursue legal action. When it received a management improvement recommendation in November last year, it filed a lawsuit seeking to overturn the measure and also sought an injunction at the Seoul Administrative Court. The injunction request was denied.
A financial regulator said authorities will “review necessary follow-up measures in accordance with laws and principles.”
* This article has been translated by AI.
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