Insurance Research Institute: "Stablecoins Enable Integration of Insurance with Lending and Investment Products"

Korean Industry and Legislation Still in Early Stages

"Insurers Should Respond Step by Step to Regulatory Changes"

An analysis from the insurance industry suggests that stablecoins, if utilized effectively, could help diversify insurance portfolios by integrating insurance products with other financial functions such as lending, payment, and investment. However, experts advise that as the introduction of laws and systems related to stablecoins is progressing somewhat slowly, insurance companies' ability to respond to regulations will be crucial.

The Korea Insurance Research Institute announced on the 25th that it had released a report titled "Stablecoins and Challenges in the Insurance Industry."

Younghyun Cho, a research fellow at the Korea Insurance Research Institute, wrote the report to explore the potential uses of stablecoins—currently being incorporated into the institutional payment and settlement systems of major countries—and to present response strategies for insurers and financial authorities.

According to the report, as stablecoins become more widespread, not only the development, sales, and claims processing of insurance products, but also the entire intermediary structure and value chain could be fundamentally reorganized.

If stablecoins are recognized as legal tender, they can have stable value. When combined with blockchain technology, this enables the creation of modular insurance products that integrate lending, payment, and investment functions into a single offering.

Looking at overseas examples, stablecoins are used to improve payment and settlement efficiency, automate underwriting and claims assessment, and innovate capital procurement and risk assumption structures. However, most of these cases remain at the proof of concept (PoC) or small-scale pilot stage.

For instance, Aon has completed a PoC for multi-chain and multi-asset premium payments, demonstrating that stablecoins can reduce settlement time and costs.

Etherisc’s index-type insurance products for flight delays, crops, and depegging are examples that combine oracle-based automatic condition assessment with instant stablecoin settlements. This has proven that the entire process—from insurance claim to assessment to payment—can be automated.

Nexus Mutual has utilized stablecoins as a means for insurance premium and claim payments, a channel for capital raising, an operational asset, and as a risk covered by its products. It has implemented the principles of traditional mutual insurance in a blockchain environment.

In Korea, the insurance sector is still at an early stage in terms of stablecoin verification. Notably, Kyobo Life is simultaneously conducting pilot verifications of tokenized government bond settlements and global stablecoin infrastructure.

The report recommends that, from a supervisory and policy perspective, it is necessary to establish the following institutional foundations: clarification of the legal status of stablecoins; a review of the range permitted under the Insurance Business Act; supplementation of the new capital adequacy regime (K-ICS); and refinement of the legal validity of insurance claim payments made via smart contracts.

Currently, the Insurance Business Act does not explicitly limit premium and claim payment currencies to Korean won. However, under the Bank of Korea Act, the principle is that the Korean won is the legal currency, and under the Foreign Exchange Transactions Act, virtual assets are neither legal tender nor foreign exchange. This means there is no clear legal basis for using stablecoins as a means of payment.

The regulatory framework for asset management under the Insurance Business Act is also unclear. Virtual assets are not assumed as investment assets for insurers, and the K-ICS framework does not provide a separate method for measuring risks related to virtual assets.

It is also uncertain whether automatic claim payments executed by smart contracts would be recognized as a legitimate insurance payment process under the Insurance Business Act.

Research fellow Cho advised, "For insurance companies to utilize stablecoins, it is important to clearly recognize the current legal and institutional constraints and respond step by step in accordance with the pace of regulatory changes."

This content was produced with the assistance of AI translation services.