FSS chief Jeong Eun-bo speaks during a meeting with heads of major banks in Seoul on Nov 9, 2021. (Yonhap)

South Korea's financial regulator called Thursday for local insurers to increase their loan loss reserves as part of efforts to better cope with potential risks facing the industry amid increasing financial market uncertainty.

Jeong Eun-bo, head of the Financial Supervisory Service (FSS), made the call in a meeting with top officials of insurance firms in Seoul and voiced worries that there are signs for a "perfect storm," citing the US's move to tighten monetary policy and the fallout of the ongoing Ukraine-Russia war.

"It is necessary for insurers to actively respond to short-term financial shocks, given that steeply rising market interest rates of late could result in increasing losses on valuation of bonds and hurting their financial soundness," he said.

"It is necessary for them to pay attention to manage potential risks, such as preemptively beefing up capital, stocking up on more loan loss reserves and strengthening monitoring on alternative investment," he added.

Local insurers -- life and non-life insurance firms -- saw their combined net profit jump in 2021 thanks to a fall in loss rates amid the pandemic and massive dividend payout by top tech giant Samsung Electronics Co., the FSS earlier said.

Their combined net profit came to 8.27 trillion won ($6.8 billion) last year, up 36.2 percent from a year earlier, it said.

Their equity, however, shrank from 143.3 trillion won to 134.6 trillion won due in part to a fall in valuation of their bond holdings affected by rising market interest rates. (Yonhap)