Insurance firms saw their loans grow at the fastest pace in two years as a result of the authorities’ tight control on bank loans, data showed on Friday.

According to the Financial Supervisory Service, Korea’s insurers lent a combined 95.5 trillion won ($84.2 billion) to companies and households as of the end of the third quarter, up 4.1 trillion won, or 4.45 percent from the previous quarter.

The rapid growth marked the highest level since September 2009, when the figure reached 4.75 percent.

The loans extended by insurance firms during the cited period break down to 66.8 trillion won for households and 28.6 trillion won for companies. The growth rate stood at 4.79 percent for households and 3.58 percent for corporations.

“Since June when the government announced a plan for the soft landing of household debt, banks were discouraged from extending loans, which resulted in a rise in loans handled by insurance firms,” said an official from the FSS.

The default rate on loans extended to corporations rose from 1.77 percent in end-June to 2.19 percent in end-September.

Small and medium-sized companies struggled most, with their default rate rising from 2.59 percent to 3.25 percent, the highest growth in a year.

The default rate for household loans, in contrast, edged down from 0.8 percent to 0.75 percent over the same period.

The FSS said it would advise insurance firms to strengthen their risk management in extending loans to households and small enterprises.

By Yang Sung-jin (insight@heraldcorp.com)