"Measures Needed for Insurance Guaranteeing Risks of Business Suspension Due to Infectious Diseases"

As the number of confirmed cases of the novel coronavirus infection (Wuhan pneumonia) reached four domestically, the infectious disease crisis alert was raised from caution to warning. On the 28th, the waiting area for check-in of Chinese nationality airlines at Incheon International Airport appeared quiet.
/ Yeongjongdo - Photo by Kim Hyunmin kimhyun81@

[Asia Economy Reporter Oh Hyung-gil] As the risk of business interruption due to natural disasters or infectious diseases increases, there is a call to consider insurance coverage for such risks.

Song Yoon-ah, a research fellow at the Korea Insurance Research Institute, introduced the current status of business interruption insurance in a report titled "Current Status and Challenges of Business Interruption Risk Coverage for Companies," published on the 15th in the 'KIRI Report,' and made this suggestion. Business interruption insurance covers fixed costs and lost profits resulting from business interruptions.

Recently, as companies' dependence on external suppliers has deepened and supply chains have become more globalized, the risk of business interruption has increased.

When the great flood in Thailand in 2011 and the Great East Japan Earthquake occurred, the supply of automobile parts and hard disk drives (HDD) was interrupted, causing production activities of automobile manufacturers and information technology (IT) companies in several countries to halt.

However, non-life insurance companies currently provide minimal business interruption insurance that pays claims only when the interruption is accompanied by physical damage to the insured party or supplier.

Even if physical damage occurs, losses caused by war, riots, terrorism, nuclear weapons and radiation, confiscation by lawful authorities, or orders from public institutions are not covered.

There are also no insurance products that compensate for losses arising from supply chain interruptions or forced closure of business sites due to infectious diseases or trade sanctions.

Therefore, the report suggested that to reduce coverage gaps for business interruption risks, awareness of the necessity of business interruption insurance among companies and the government should be raised, and government-led measures to encourage subscription should be explored.

It also added that insurance companies need to strengthen their risk assessment and underwriting capabilities for business interruption insurance and develop products that diversify special clauses or subscription limits for business interruption insurance.

This content was produced with the assistance of AI translation services.