Only 15.9% of subrogation payments recovered within one year

Uncollected claims older than 10 years reach 1.35 trillion won

A commercial building in Seoul with vacancy signs posted. [Yonhap]
A commercial building in Seoul with vacancy signs posted. [Yonhap]

The Korea Credit Guarantee Fund takes an average of eight and a half years to recover subrogation payments it makes to financial institutions on behalf of defaulting guaranteed companies, with nearly 9 trillion won ($6.66 billion) in claims still outstanding.

According to data submitted to People Power Party lawmaker Park Sung-hoon of the National Assembly's Political Affairs Committee, the average recovery period for subrogation claims stood at eight years and five months as of the end of August, with a median of seven years and six months.

Only 15.9 percent of subrogation payments were recovered within one year as of August. The recovery rate for claims between one and three years old was 16.1 percent, while the rate for claims in the three-to-five-year range was limited to 4.8 percent.

As of August, uncollected claims between one and three years after subrogation were the largest category, totaling 18,259 cases worth 3.24 trillion won.

Claims under one year old accounted for 1.49 trillion won, those in the three-to-five-year range for 1.37 trillion won, and those in the five-to-ten-year range for 1.49 trillion won.

Claims that remained uncollected more than 10 years after subrogation reached 11,890 cases totaling 1.35 trillion won.

Long-term uncollected claims of five years or more combined to 23,215 cases worth 2.84 trillion won. Total outstanding subrogation claims reached 8.93 trillion won.

Some claims have gone unrecovered for decades. Among companies that fully repaid their subrogation obligations in a given year, the longest recovery period recorded was 36 years and five months in 2022, 34 years and two months in 2023, 37 years and nine months in 2024, and 33 years and 11 months in 2025.

As of August, one case had taken 35 years and two months to resolve.

Concerns are mounting that the fund's fiscal burden could accumulate if recovery continues to take so long, particularly as subrogation payments grow rapidly, pointing to the need for a stronger claims management framework. The cumulative default rate for the small business low-interest loan refinancing guarantee program — which ran from September 2022 through December 2024 — stood at 26.6 percent as of the end of July.

"If post-subrogation recovery is managed loosely under the banner of policy finance, it ultimately sends the wrong signal that this is money that does not need to be repaid," Park said. "We must strengthen asset tracing for debtors with the ability to repay and tighten management of long-overdue claims to prevent moral hazard and minimize the burden on the public."


hyuk@heraldcorp.com