Page 20 - WTW Asia Insurance Market Report
P. 20

Republic of Korea	

The insurance market in 2016 was soft due to excess                   Reinsuring International Risks
capacity leading to rate deterioration across most
lines of business. Due to the economic slowdown,           The economic slowdown has impacted Korea and its
local insurance companies were scrambling for              effects are expected to continue on for a few years. Due
sparse new business, especially in the construction        to the lack of new business opportunities in Korea, there
sector. There was also intense competition between         has been an increase in interest to reinsure international
insurers for renewal accounts, evident from the            risks in Korea. Though this boosts business for insurers,
fact that most renewal accounts received price             a number of local insurers lack experience in handling
reductions of close to 20%. The rates for Credit           international risks and this could affect their risk portfolio
Insurance also decreased in 2016. KEXIM Bank was           negatively in the long term.
the sole provider of export credit insurance in the
market before the government allowed a few local           Failure of Samsung Galaxy Note 7
insurers to sell short-term export credit insurance to
private companies in 2016.                                 Samsung accounts for 20% of the Korea’s GDP. On August
                                                           2 2016, Samsung Electronics unveiled the Galaxy Note 7.
On September 12 2016, a 5.8 magnitude earthquake           Twenty days later, reports of a Note 7 explosion surfaced,
struck Gyeongju, the largest earthquake to strike          following which Samsung recalled a number of devices
Korea. A week later, an aftershock caused further          citing faulty battery issues. Despite resuming sales of the
impact. Eastern Korea was also impacted by the             device with a safer and modified battery, more incidents
Kumamoto earthquakes in Japan in April. Though             of explosions and fires surfaced, halting production and
these earthquakes did not impact large corporations        triggering the large-scale recall of the Galaxy Note 7.
and their offices, property damage to houses and small     The failure of the Note 7 is estimated to cost Samsung at
buildings in the region was reported. This has sparked     least USD 5.3 billion. Following this incident, a number of
an interest in earthquake exposure coverage (EQ) and       clients who are in the mobile manufacturing business have
resulted in a slight hardening of this line.               shown interest in Product Recall insurance. This demand is
                                                           expected to grow as the Galaxy Note 7 situation unfolds.
In October 2016, the country was hit by Super Typhoon
Chaba, one of the world’s strongest typhoons. This         The failure of the Note 7 is estimated to cost Samsung at
was the fourth storm to hit the region in a span of three  least USD 5.3 billion. Following this incident, a number of
weeks, causing extensive flooding and damage. The          clients who are in the mobile manufacturing business have
severity of the loss is unknown, but it is estimated that  shown interest in Product Recall insurance. This demand is
losses could cross USD 200 million.                        expected to grow as the Galaxy Note 7 situation unfolds.

“Most lines of business have seen
rates decrease, with the exception of
Earthquake Exposure coverage”

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