Samsung Fire, Hyundai Marine among insurers exposed, as war-risk premiums surge
South Korean insurers face nearly 1.7 trillion won ($1.14 billion) in marine insurance exposure, as escalating conflict in the Middle East disrupts shipping through the Strait of Hormuz, with risks extending beyond insured values to rising war-risk premiums, tighter reinsurance conditions and potential delays in claims recovery.
According to data from the Financial Supervisory Service submitted to Rep. Kang Min-kuk of the main opposition People Power Party, 10 domestic insurers and two reinsurers carried a combined exposure of 1.69 trillion won tied to vessel and cargo coverage as of March 9.
Primary insurers accounted for about 86 percent of the total, or 1.46 trillion won, with the remaining portion held by reinsurers.
By policy type, vessel insurance exposure totaled about 980 billion won, while cargo insurance stood at roughly 707 billion won.
Among individual companies, Samsung Fire & Marine Insurance held the largest exposure at 427 billion won, followed by KB Insurance at 333 billion won and Hyundai Marine & Fire Insurance at 284.3 billion won.
Among reinsurers, Korean Re carried the largest exposure, estimated at 222.1 billion won.
Industry observers say the more immediate pressure lies not in the insured exposure itself, but in the sharp rise in war-risk insurance costs for ships operating in the Persian Gulf.
Estimates from the London insurance market show war-risk premiums for voyages through the region have climbed from around 0.25 percent before the conflict to roughly 1 percent to 1.5 percent, and in some cases as high as 3 percent.
Marine war-risk clauses typically allow insurers or reinsurers to withdraw existing coverage within a specified period after a conflict begins and renew policies at higher rates, according to industry sources.
“When the risk level rises sharply, insurers can cancel the existing war-risk portion of the cover and renew it under revised terms,” a local insurance industry official said. “The immediate burden therefore falls first on shipowners and cargo owners, who must pay higher premiums to maintain coverage in high-risk waters.”
For insurers, however, actual financial losses would materialize only if vessels or cargo suffer damage.
“The current exposure should be viewed as the maximum potential payout rather than an estimate of imminent losses,” the official said, adding that it is still too early to conclude the situation could lead to large-scale losses or an industrywide liquidity crisis.
Still, authorities have begun preparing contingency measures.
Last week, the Financial Supervisory Service convened a meeting with insurers to review temporary steps aimed at preventing liquidity strains if major claims occur and settlement payments from overseas reinsurers are delayed.
jwc@heraldcorp.com
