Insurance firms in South Korea saw their risk-based capital fall in the fourth quarter of last year, data showed Monday.

The risk-based capital (RBC) ratio of local insurance firms stood at 275.1 percent at end-2020, down 8.8 percentage points from three months earlier, according to the data from the Financial Supervisory Service (FSS).

Their RBC ratio fell in the fourth quarter as their funds to hedge against risks increased, the FSS said.

A key yardstick of financial stability, the RBC ratio -- the actual solvency capital divided by the minimum solvency capital required -- measures an insurer's ability to absorb losses and pay insurance money to policyholders.

Local insurers are required to maintain the ratio at 100 percent or above, while the watchdog advises insurance firms to have ratios of 150 percent or higher.

Insurance firms in South Korea are required to gradually increase their capital reserves to better cope with tougher global accounting standards for insurers, set to go into effect in 2022. (Yonhap)