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By Anna J. Park
Local insurance companies are feeling the force of the climate crisis, with the industry increasingly paying out claims for coverage due to natural disasters.
According to data submitted to Rep. Jang Hye-yeong of the Justice Party, who is also serving on a special parliamentary committee on climate change, the aggregated coverage paid by local insurers for claims on natural disaster insurance policies has more than tripled over the past five years.
Local insurance companies paid out a total amounting to 1.25 trillion won ($975 million) last year for claims related to natural disasters, such as typhoons, floods, strong winds, heavy snowfall and cold weather. In 2017, the aggregated amount of coverage payments stood at 394.7 billion won, showing a 3.2-fold increase over the past five years. The number of claims rose 4.3-fold over the same five-year period.
Sum coverage payments increased sharply during the period, reaching a peak of 1.3 trillion won in 2020. They then decreased briefly in 2021, followed by a significant increase in 2022.
The pattern illustrates the reality that insurance companies worldwide are currently facing. Swiss Re's report published earlier this year showed that insured losses from natural catastrophes have been rising for the past three decades. In 1992, the total insured loss was estimated at around $50 billion, but it soared to $125.2 billion in 2022, a growth of more than 2.5 fold. The figures are being adjusted to the price level of 2022.
"From 2017 onwards, average annual insured losses from natural catastrophes have been over $110 billion, more than double the $52 billion average for the previous five-year period," the report stated, adding that the insured losses are expected to continue growing in the future, regardless of year-on-year volatility.
With the number of natural disasters rising due to the climate crisis, more cases are emerging of reinsurers refusing to underwrite or insurance companies going bankrupt due to surges in coverage payments.
"The Insurance industry should seek ways to mitigate risk factors, while local insurers are called upon to make efforts to discontinue investments in fossil fuels," Rep. Jang said. "Local insurance firms should also disclose carbon emissions related to their investments."
The lawmaker also urged the government to expand government-backed policy insurance plans covering natural disasters at lower premium rates for vulnerable groups affected by the climate crisis.
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