South Korea’s worst wildfire in history could prompt insurers to strengthen their risk management and underwriting expertise, and to potentially seek more protection through reinsurance, as the event could make individuals seek more protection against catastrophe and weather-related events, according S&P Global Ratings analysts.
“South Korea’s wildfires will lead to moderately higher claims for property and casualty insurers and reinsurers operating in the country. We estimate the insurers and reinsurers we rate in South Korea can absorb the losses, although this will dent their underwriting results,” said Emily Yi, S&P credit analyst.
According to the report, thanks to their broad reinsurance coverage, diversified business portfolios, and strong capital adequacy, the rated insurers have the capacity to manage an increase in claims.
For Korean Reinsurance Co., its excess-of-loss retrocession arrangement will likely help it to manage retained losses.
While the fires have caused devastating losses to life and property, the largely rural location of the fire has contained insurers’ exposure to the event.
The report highlighted that South Korea’s insurance industry could face earnings strain in 2025 if other extreme weather-related events ensue. The country is prone to typhoons and flooding from heavy rainfalls, generally concentrated in July and August.
Moreover, the increase in catastrophes could also lead to higher cost of reinsurance, which would likely constrain margins for insurers, according to Howden.
“As catastrophes become more frequent, so will public awareness and demand for insurance protection against such events,” said Yi. “Korean property and casualty insurers and reinsurers will likely need to strengthen underwriting expertise and risk management capabilities in response to this higher demand.”
The wildfire in the country’s southeast region burned for approximately nine days, destroying around 48,000 hectares of primarily forest and damaging thousands of rural homes. The fire, which was mostly contained by March 30th, caused nearly 30 deaths.
The area affected by the fire is more than double that of the Los Angeles wildfires in January 2025.
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