[1mm Financial Talk] Why Insurance Companies Are Nervous About Typhoon Damage at POSCO

Severe Rainfall in Seoul Followed by Typhoon Damage... Insurance Compensation Expected to Snowball
"The Scale of Damage from This Year's Typhoons and Heavy Rainfall Is Certainly Unprecedented"

On the 8th, mud accumulated by Typhoon Hinnamnor still remains uncleared in the slab yard of POSCO Pohang Steelworks 2 Hot Plate Plant in Nam-gu, Pohang-si, Gyeongbuk. [Image source=Yonhap News]

[Asia Economy Reporter Changhwan Lee] The insurance industry is on high alert as POSCO suffers severe damage from Typhoon Hin Nam No. The damage to POSCO is expected to be greater than anticipated, leading to a snowball effect in the insurance payouts that insurers will have to make.

According to industry sources on the 15th, POSCO's Pohang Steelworks experienced massive damage due to flooding of major facilities caused by last week's typhoon, resulting in the suspension of blast furnace operations. Although the blast furnace has resumed operation after rapid restoration work, some key lines such as hot rolling and cold rolling have yet to be restored.

In particular, the rolling lines that produce steel products by applying heat and pressure to iron have most of their facilities flooded, making it difficult to estimate the timeline for full recovery. These rolling facilities produce major steel products such as hot-rolled steel sheets and cold-rolled steel sheets, and operations are currently disrupted.

The exact scale of the damage POSCO sustained from this typhoon has not yet been accurately estimated. POSCO explained that the overall damage can only be assessed once the restoration of the underground facilities of the flooded rolling lines progresses to some extent.

However, the industry expects that the direct and indirect damage POSCO has suffered this time could amount to at least several hundred billion won. This includes costs for equipment and facility replacement, as well as losses from production disruptions, with estimates suggesting daily damages reaching hundreds of billions of won.

Jang Young-jin, First Vice Minister of the Ministry of Trade, Industry and Energy, also stated at a briefing the previous day, "The damage to the Pohang steel industry caused by Hin Nam No is extraordinarily severe, unprecedented in scale," adding, "It is expected to take up to six months or more for the hot rolling Plant 2 to return to normal operations."

As POSCO faces unprecedented typhoon damage, concerns among domestic insurers have grown. POSCO Pohang Steelworks has fire insurance contracts with major domestic non-life insurers, allowing for partial compensation of damages.

In terms of insurance share, DB Insurance holds 40%, Samsung Fire & Marine Insurance 25%, and Hyundai Marine & Fire Insurance 15%, respectively. The damage to buildings and equipment caused by flooding is expected to reach at least several hundred billion won, making compensation burdens unavoidable for insurers.

Insurers have currently dispatched compensation teams to Pohang to assess the overall damage caused by the typhoon and to carry out compensation work. They are compensating not only POSCO but also for flooded vehicles and buildings caused by Hin Nam No. It is estimated that over 8,400 flooded vehicles occurred in Pohang alone, and when including other regions, the total easily exceeds 10,000 vehicles. The damage from flooded vehicles alone amounts to hundreds of billions of won.

Following the heavy rain damage centered in the Gangnam area last month, the situation is described as adding insult to injury. An insurance industry official said, "Since the restoration work at Pohang Steelworks is still ongoing, the exact scale of the damage has not yet been fully grasped," but added, "It is certain that the damage caused by typhoons and heavy rains this year is record-breaking."

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