Korea's insurers face 'disruptive change' over looming rate hike

South Korea's insurance industry will face a "disruptive change" if the nation's central bank raises interest rates, a senior official at the financial regulator said Tuesday.

The Bank of Korea is expected to raise its key rate in coming months, marking its first tightening in more than six years.

Kim Yong-beom, vice chairman of the Financial Services Commission, told a forum on the insurance industry, "You see in Korea, the biggest disruptive change to our insurance industry emerged when the 'normal' interest rate environment was redefined." 

Vice chairman of the Financial Services Commission Kim Yong-beom (Yonhap)

The official did not specify what the change was or how a rate hike affected the insurance industry.

The US Federal Reserve has raised interest rates from ultra-record lows set at the depths of the 2008-09 global financial crisis.

Kim hailed the "zero-rate policy" around the world as a "powerful tool" to avoid recession.

"When I was a student, we were taught that fiscal policy is the main tool to fight business cycles, but now we know that free money is a very powerful tool -- especially if conducted with global coordination," Kim said. "We now have a formula on how to avoid recession." (Yonhap)