As the Monsoon Ends, a Record-Breaking Typhoon Approaches... Non-Life Insurers Face Billions in Losses (Comprehensive)

Flooding and Mass Death Expected to Cause Damage Worth Hundreds of Billions
Loss Ratio Likely to Surge Again in the Second Half

[Asia Economy Reporter Oh Hyung-gil] Following record-breaking heavy rains that caused flooding of vehicles and farmland, as well as the death of crops and livestock resulting in damages worth thousands of billions of won, the unprecedented typhoon 'Bavi' is approaching, putting the non-life insurance industry on high alert.

As recovery efforts are underway, additional damage is inevitable due to the typhoon bringing heavy rain and strong destructive winds. It is expected that the loss ratios of non-life insurers will surge sharply in the second half of the year when full-scale compensation begins.

According to the non-life insurance industry on the 26th, the number of crop disaster insurance claims due to the recent heavy rains exceeded 60,000 as of the 24th.

By item, rice accounted for the largest number with over 30,000 cases. Horticultural facilities accounted for about 7,000 cases, and pears about 3,000 cases.

The damaged area reached a total of 25,005 hectares. This is nearly 41% of the area of Seoul (60,502 hectares).

Livestock disaster insurance claims also reported 221 cases of damage, including 139 cases for poultry, 45 for pigs, and 29 for cattle. In particular, numerous landslides caused by the heavy rains have led to over 60 reported cases of damage related to solar power generation so far.

Although the official damage amount has not been released, it is estimated to reach up to thousands of billions of won.

Currently, relevant government departments and NongHyup Property & Casualty Insurance are working on estimating the specific scale of the damage, but it is reported that fieldwork is facing difficulties due to the resurgence of COVID-19.

Non-life insurers, which performed well in the first half of the year, face an urgent crisis as loss ratios are expected to surge in the second half.

Flood damage to vehicles is also rapidly increasing like a snowball. From the 9th to the 19th of last month, the Korea Non-Life Insurance Association collected reports from insurers of vehicles flooded, totaling 9,123 vehicles. The damage amount alone reached 86.5 billion won.

Although the damage scale is less than that of the 2011 heavy rains (damage amount 99.3 billion won) or the 2003 typhoon 'Maemi' (91.1 billion won), the industry expects it could increase further.

The problem is that the 8th typhoon 'Bavi', accompanied by strong rain and wind with speeds of 60 meters per second, is additionally approaching the Korean Peninsula. It is expected that the entire country will fall under the typhoon's influence as Bavi passes over the West Sea on the 27th of this month.

Non-life insurers are concerned that the loss ratios, which had been stable, will rise again due to this worsening weather. The automobile insurance loss ratio in the first half of the year was 84.3%, down 3.2 percentage points compared to the same period last year.

This is due to reduced vehicle operation and accidents caused by COVID-19. The loss amount for automobile insurance also decreased significantly from 418.4 billion won in the first half of last year to 125.4 billion won, a reduction of 293 billion won.

Non-life insurers are advising automobile insurance policyholders to refrain from driving and to pay attention to safety. Samsung Fire & Marine Insurance recently sent notices to automobile insurance customers advising them to avoid driving as much as possible and to move their vehicles to safe areas to prepare for flooding and falling debris damage.

An industry official said, "If flooding damage to cars, houses, and farmland worsens due to the heavy rains followed by the typhoon, the loss ratios will deteriorate significantly not only for automobile insurance but also for general insurance," and urged, "Please take special precautions such as inspecting facilities and being careful when driving."

[Image source=Yonhap News]

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