Hanwha’s non-life insurer faces costly claims after E-Land warehouse fire

Part of the logistics center of E-Land Fashion in Cheonan, South Chungcheong Province, is damaged and collapsed after a massive fire, Saturday. Yonhap

Hanwha General Insurance faces potentially costly claims after a massive fire at a warehouse where it serves as a primary insurer, with damages estimated in the hundreds of billions of won, according to industry officials Monday.

The non-life insurance arm of Hanwha Group said it is “assessing the situation,” declining to provide further details about the blaze at E-Land Fashion’s logistics center in Cheonan, South Chungcheong Province, on Saturday.

Industry officials, however, reckon that it could result in sizable claims, noting that the logistics center is one of Asia’s largest and serves as the central hub of retail giant E-Land’s fashion business.

The facility spans from a basement level to four floors aboveground, covering 193,210 square meters — equivalent to 27 football fields.

It can accommodate 150 trucks at once and handle up to 50,000 boxes, storing more than 11 million clothing items.

Fire authorities confirmed there were no casualties, but most of the inventory is believed to have been destroyed in the blaze.

“Hanwha General Insurance takes on a costly responsibility as the primary insurer,” an insurance broker said, referring to the widely practiced contract structure.

A primary insurer usually covers about half of the total payout — the money paid to settle a claim — while other insurers share the remainder through agreements.

For contracts with especially high insured amounts, the risk is often further spread to reinsurers to help mitigate potential losses.

This, however, does not eliminate the primary insurer’s financial exposure.

“Given the large scale of the fire, Hanwha General Insurance, as well as the co-insuring companies, are expected to pay a substantial amount in insurance claims,” the broker said.

Another industry insider noted that E-Land’s fashion inventory assets totaled 444.4 billion won ($304.4 million) in the third quarter, which included many of the goods stored at the Cheonan logistics center.

The insider also pointed out that fashion accounts for more than 50 percent of E-Land’s total sales.

E-Land said, “The preparation is underway for alternative logistics to minimize inconvenience to customers.”

Meanwhile, an industry official said it would be premature to assume the claim will be excessively large, noting that Hanwha General Insurance has further mitigated its risk through reinsurance with firms such as Korean Re.

“The amount is expected to be only in the tens of billions of won,” the official said.