Nam Hyun-woo has worked as a staff writer at The Korea Times since 2013, mostly covering business and politics. He currently belongs to the Business Desk where he covers topics such as emerging tech, AI, ICT and Korea's chaebol community. Prior to joining the team, he was the paper's correspondent for the presidential office of Korea during the Yoon Suk Yeol and Moon Jae-in administrations.
Korean Re fined W7.6 bil. for abusing market power
By Nam Hyun-woo
Korean Re CEO Won Jong-gyu
By Nam Hyun-woo
Korean Re was slapped with a 7.6 billion won fine ($6.72 million) for abusing its unchallenged status in the general aviation reinsurance market for nearly two decades, the antitrust regulator announced Monday.
The Fair Trade Commission (FTC) said the reinsurer has been exploiting its market-controlling power to monopolize the market and bar potential rivals from entering the market since April 1999.
Following this Korean Re signed an agreement with all nonlife insurers in the nation's general aviation reinsurance market, forcing them to apply its rating system when those insurers underwrite insurance policies and cede all of their reinsurance contracts to Korean Re, the FTC said.
Aviation insurance involves huge payments and risks, thus most of nonlife insurers cede risks and responsibility to compensate reinsurers, which in this case is Korean Re.
Currently, 380 small airplanes and rescue helicopters are registered for general aviation, which contrasts with commercial aviation. Those are insured by 11 nonlife insurers in Korea, worth 29 billion won as of last year.
In this general aviation reinsurance market, Korean Re has been maintaining an average market share of 88 percent in the past five years, virtually dominating the market.
The FTC also said Korean Re gave disadvantages to insurance brokers which set up deals between overseas reinsurers and domestic nonlife insurers, to consolidate its unchallenged status.
In 2017, Korean Re urged an insurance broker to punish an employee who set up a deal between a domestic insurer and a foreign reinsurer over insurance for a government helicopter, according to the FTC. Also, it demanded another overseas reinsurer to stop doing business with a domestic insurer, threatening to sever its other existing deals with the overseas reinsurer.
The FTC said Korean Re was able to retain its 88 percent market share through these activities and hampered potential rivals from making entry into the market, as well as keeping its reinsurance rate high. Also, Korean Re prevented nonlife insurers from having virtuous market competition, deteriorating consumers' rights severely.
“Even though the country's reinsurance market has been open to overseas companies since 1993, Korean Re has been consolidating its market power through unfair activities,” an FTC official said. “With the punishment, freer competition between companies will be available.”
The FTC did not punish the 11 nonlife insurers that joined Korean Re's 1999 agreement, because there is no evidence those firms colluded to do so and they were exploited by Korean Re's bid to maintain its control on the market.