Samsung Fire's marine insurance falters

By Nam Hyun-woo

Korean non-life insurance firms floundered in marine business last year as local shipping firms slumped amid the global downturn. In particular, Samsung Fire & Marine struggled to find its feet.

The General Insurance Association of Korea said Monday that direct premiums written by domestic non-life insurers totaled 607.99 billion won last year, down 14.26 percent from a year ago.

Such a contraction lasted throughout last year. The insurers’ total direct premiums written for marine insurance shrank 19.88 percent in the first quarter of 2016 from the previous year, 14.33 percent in the second quarter and 14.18 percent in the third quarter.

Direct premiums written are similar to manufacturer’s sales, showing an insurer’s business growth. The smaller amount means that the domestic marine insurance market contracted last year.

Samsung Fire & Marine suffered most as its direct premiums written declined 38.65 percent to 98.89 billion won. Its marine insurance business has shrunk since 2014 when the direct premiums written peaked at 202.47 billion won.

The figure plunged to 161.2 billion won in 2015 as its smaller rival Hyundai Marine Insurance rose to the top slot with 186.25 billion won. In other words, Samsung saw its premium income more than halved in just two years.

Samsung Fire CEO Ahn Min-soo

Samsung Fire, headed by CEO Ahn Min-soo, said that it intended the business contraction.

“Based on accumulated data, we are slashing the number of contracts with high loss ratios and filling the portfolio with contracts with lower risks,” a Samsung Fire official said. “Although our marine insurance sales decreased, our profitability improved.”

However, the Seoul-based firm refused to disclose data on its improved profitability, saying that it is for internal use only.

Industry watchers say not only Samsung Fire but also its competitors experienced a downturn last year due to the sagging shipping industry.

The country’s two major shippers ― Hyundai Merchant Marine (HMM) and Hanjin Shipping ― went through creditor-led restructuring last year due to liquidity crises.

The former managed to remain alive ― now the state-run Korea Development Bank owns it. However, the latter declared bankruptcy earlier this year with most of its assets being liquidated.

“The shipping industry greatly affects the marine insurance business,” an insurance source said.

Indeed, most of the non-life insurance companies watched their marine business falter last year with a few exceptions like Lotte, AIG and ACE.

But none suffered such a drastic fall as Samsung. For example, business bellwether Hyundai Marine’s downfall amounted to just 5.6 percent year-on-year.

“Marine insurance is not the major business of non-life insurance companies. Hence, the decreased income in the marine segment would not pose a great threat to any firm,” a Seoul analyst said.

“But obviously it is not good news. They would hope to bounce back in the area in line with the recovery of the shipping industry. One uncertainty is that it is not sure when the recovery would happen.”