Insurance companies in South Korea have initiated compensation payments to policyholders for vehicle damages caused by trash-filled balloons launched from North Korea, according to industry sources on Wednesday.
Standard insurance policies in South Korea generally do not cover damages resulting from acts of war or external provocations.
“It appears insurance companies debated over whether to offer compensation to customers,” an insurance industry source told Korea Times.
Local reports indicated that an insurance firm compensated a policyholder in Ansan, Gyeonggi Province, with KRW330,000 =after a balloon from North Korea damaged the windshield of the policyholder’s vehicle on June 2. The total repair cost was KRW530,000 =(approximately $385).
Under the policy terms, the policyholder was responsible for KRW200,000, with the insurance company covering the remaining KRW330,000.
“It marks the first case of a car insurance policyholder receiving benefits concerning damage caused by the North’s balloon offensive,” the source told Korea Times.
For privacy reasons, specifics about the insurance company and the policyholder were not disclosed.
Another source mentioned that a different car insurance firm in Seoul’s Dongdaemun District received a similar claim.
“The company is said to be handling the issue in accordance with the contract,” the source said.
In other news from South Korea, Fitch Ratings has assessed that South Korean insurers are well-positioned to handle declines in the valuations of their international commercial real estate (CRE) investments and related exposures.
The firm does not expect these declines to significantly impact the ratings of South Korean insurers in the short term.
Higher interest rates and changes in work and consumption patterns post-COVID-19 have created the potential for impairment losses among Korean insurers with CRE holdings.
However, Fitch projects the impact on profitability to be relatively minor. It anticipates that increased release of contractual service margins (CSMs), supported by strong underwriting performance, will help sustain profitability levels despite potential fluctuations in investment returns, including possible CRE-related losses.
Data from the Financial Supervisory Service (FSS) revealed that as of the end of September 2023, Korean insurers’ foreign CRE exposure stood at KRW31.9 trillion, the highest value exposure within the Korean financial sector. This exposure accounts for about 3% of the industry’s total invested assets and approximately 12% of insurers’ total shareholder equity, considering CSMs net of tax.
