Downpours affect insurers, airlines, builders

By Kang Seung-woo

Three days of torrential rain across much of Korea has hit the nation’s industries hard, in sectors ranging from non-life insurance to construction.

According to the Financial Supervisory Service (FSS), there were a total of 5,839 reports of car damage as of Thursday afternoon and local non-life insurance companies are estimated to have to compensate policyholders 40.3 billion won ($38.29 million). The amount is 14 times larger than the 2.8 billion won in compensation between January and June this year combined and the number of reports is the highest monthly record since September last year, when a typhoon resulted in 11,198 claims, resulting in 35.7 billion won being paid in compensation.

Making the insurers’ situation worse, high-end foreign cars in the Gangnam area were submerged, which is expected to further increase settlements

The financial watchdog estimates the insurers’ July average loss rate will soar by about 4 percentage points amid concerns that growing compensation claims are likely to erode profits of non-life insurance firms, which were already hit hard last year in their auto insurance business.

“We expected to see profit growth for this year with the loss ratio calming down, but it remains to be seen now due to the torrential rains along with possible typhoons hitting the peninsula in August and September,” said an industry official.

Last year, the auto insurance’s loss ratio posted an all-time yearly record of 80.3 percent, with a loss of 1 trillion won in the sector.

The banking industry was also battered by the downpours, as a combined 97 branches of seven commercial banks suffered power failures or flooding as of Thursday, the FSS noted.

Among them, 23 had to be shut down while officials from some branches had to evacuate their offices.

It was a silver lining that their computerized systems, which handle retail payments, avoided any breakdowns.

“We are still closely monitoring banks to prevent further damage,” said an FSS official.

“We will supervise banks that suffered from the torrential rain recover from damages.”

The construction industry and property market, which have yet to see any signs of recovery, are falling into a deeper hole.

“Due to the rainy season in the summer, the work stoppage period is longer than any other season, but the sudden downpours are likely to prolong construction periods, which will prevent us from meeting completion dates,” said a construction official.

Those who work in the housing market complain of the rain because they see fewer customers, saying “There are fewer inquiries for housing transactions due to the bizarre weather conditions, and this is in addition to the holiday season and ongoing slump.”

In the aviation industry, a total of 10 domestic flights were cancelled due to the heavy rain.

Torrential downpours hit Seoul and its surrounding areas from Tuesday to Thursday, claiming 61 lives and leaving 10 missing, according to a government report.