OREANDA-NEWS. South Korea's life insurers are unlikely to repeat the mistake of providing high guaranteed rates to gain market share that had saddled them with a decades-old negative-spread burden that lingers today, particularly under the current low-interest-rate environment, Fitch Ratings says in a new report.

The Bank of Korea has not adjusted the base interest rate since cutting it to 1.5% in June 2015, from 1.75% in March 2015. The low-interest-rate environment makes it less likely for insurers to clear their negative-spread burden - which arose in the 1990s when actual investment returns fell below the guaranteed interest rates of 8%-9% they had offered on endowment policies - in the short term, Fitch says.

Persistent low interest rates affect insurers differently, suppressing one insurer's investment yields, reducing another's funding costs, and improving valuation gains for bond investments.

Meanwhile, a wave of M&As has swept the market in 2015 and 2016 to date as foreign insurers look to expand their business operations into more Asian markets.