The South Korean financial regulator is expected to lower entry barriers for small specialized insurance firms to meet diversified demand and boost competition in the already-saturated industry, industry sources said Monday.

The Financial Services Commission (FSC) is considering revising local rules to ease the current minimum capital requirements for the establishment of a non-life insurance company in a bid to encourage smaller financial firms to sell travel, bicycle or glasses insurance policies, the sources said.

Under the current law, only insurance companies with billions of won in capital are licensed to do business in certain sectors including life, fire, auto, accident and liability.

A general non-life insurance firm that covers car, fire and travel accidents is required to have an capital of 30 billion won (US$27.1 million).

Those interested in establishing a smaller insurance firm that offers only travel insurance or bicycle insurance, however, must obtain four different licenses along with a capital of 30 billion won.

"(The FSC) is considering easing insurance license rules or guidelines to meet the market demand," said an FSC official, adding that the detailed outline will be completed by March.

Due to the high capital and license requirements and market saturation, no new general non-life insurers have acquired business permission for the past 10 years.

Experts note that the travel insurance industry has a higher growth potential in the saturated local insurance market on rising outbound travelers.

According to data, a total of 14.84 million South Korean people went overseas last year, up 17 percent from 2011, while the number of travel insurance contracts edged up 7 percent to 1.29 million from 1.21 million over the three-year period.

Travel insurance premiums reached 85.5 billion won as of September, accounting for a mere 0.16 percent of the overall general insurance premiums of 52.3 trillion won. (Yonhap)