...Further Interest-Rate Cuts Prolong Negative Spread Burden The Bank of Korea has cut the base interest rate twice thus far in 2015 ¡ to 1.75% from 2.0% in March, and again to 1.5% in June ¡ to spur economic growth. Fitch Ratings believes that the negative spread burden is unlikely to be completely wiped out in the short term, as the low- interest-rate environment is persisting for longer than expected. The negative spread burden arose in the 1990s when actual investment returns dropped below the high guaranteed interest rates of 8%-9% offered at that time on endowment policies sold by life insurers. Nonetheless, the extent of the negative spread is unlikely to be as severe as that in the 1990s. Call for Efforts to Combat Rising Incurred Loss Ratio of Motor Class Fitch attributes the upward trend of the "combined ratio" for the Korean non-life insurers largely to the rising losses for the motor class. The motor class's incurred loss ratio rose steadily from 80.4% in 2011 to 88.5% in 2014...
