Domestic Motor

In 2022, the motor insurance market in Korea saw its premium income growth slow compared to the previous year. While the increased number of registered vehicles led to a continued expansion in premium income, overall premium growth weakened due to a decrease in premium rates following improved business results.

In terms of loss ratios, COVID-19 has had a favorable impact on motor insurance. Insurance companies providing motor insurance coverage unexpectedly benefited from the pandemic because less driving meant fewer accidents and insurance claims. Following a significant improvement for two years in a row, the loss ratio remained mostly stable at 82% in 2022. Korean Re also continued to experience benign claims experiences, with the loss ratio increasing by a modest 0.25%p to 86.2% in 2022. With COVID-19 becoming an endemic, traffic volume was expected to increase and the loss ratio to bounce back to its pre-pandemic status, but rising international oil prices led drivers to cut back on driving, preventing the loss ratio from soaring.

Korean Re maintained positive top-line growth in 2022, with gross written premiums increasing to KRW 528.7 billion. As the domestic market struggled with slower business growth, we strived increasingly to focus on providing reinsurance solutions that better meet the needs of ceding insurers. We continuously expanded existing programs that cover higher risks in addition to proportional and non-proportional treaties. We also continued our efforts to boost transactions with mutual associations by strengthening our business relationships with them to find ways to accommodate their needs more effectively.

In 2023, the Korean motor insurance market is likely to see its growth momentum weaken further. Direct premiums are expected to stagnate to KRW 20.8 trillion. Although an increasing number of high value vehicles may drive premium growth, there are several downside factors, such as a growing portion of online distribution channels that offer lower rates and the government’s call for a reduction in premium rates. The loss ratio is anticipated to go up by 2.5-3.0%p due to the lifting of social distancing measures and a drop in oil prices. Rising inflation may also have an adverse impact on the loss ratio.

Under these circumstances, Korean Re aims to generate KRW 520 billion in gross written premiums from its domestic motor business in 2023, 1.6% lower than the previous year, particularly given that the implementation of IFRS 17 has reduced the need for proportional treaties. To meet this target, we will continue to develop new reinsurance programs and further broaden our business relationships with mutual associations in ways that bring business growth and value to our partners as well as to our company. We will also look to collaborate with startups in the insurtech industry in order to seize on new business opportunities and improve how we engage with our clients.

Surety & Credit

Interest rates and the real economy mainly affect surety and credit insurance. In 2022, the Bank of Korea stepped up its benchmark interest rate from 1.25% at the beginning of the year to 3.25% at the end of the year. The Korean central bank raised interest rates step by step in line with the U.S. Fed’s interest rate hike cycle after the peak of the COVID-19 outbreak. The Korean economy showed a relatively stable trend, with a GDP growth rate of 2.6% and a low unemployment rate of 2.9% in 2022, both of which were similar to pre-COVID-19 levels.

The domestic surety and credit insurance market maintained a modest growth rate of 2% in 2022. The market also saw its loss ratio stay below 50%. The low loss ratio trend has continued over the past few years thanks to the conservative underwriting policy which was maintained even before COVID-19.

Our surety and credit insurance premiums decreased by 22% in 2022 compared to the previous year due to the combination of increasing retention by primary insurers and our risk exposure reduction policy, but we still managed to sustain a low loss ratio in line with stable primary market performance.

Agriculture

Korean Re has been a reliable source of reinsurance capacity for the domestic agricultural industry. It is essential for farmers to have insurance coverage against natural catastrophes in order to maintain their business stability, and Korean Re has played a crucial part in promoting the local agricultural insurance market. Apart from utilizing our own capacity, we have also provided access to global reinsurance capacity to support the development of the local market.

The domestic crop insurance market continued to grow in 2022, with original gross premiums increasing by 11% year on year to KRW 861 billion. On the other hand, the livestock insurance market experienced slight downsizing, and its premiums decreased to KRW 220 billion in 2022. Korean Re’s business remained more or less stable, generating gross written premiums of KRW 244.3 billion from crop insurance and KRW 110.2 billion from livestock insurance.

Following the previous year, 2022 was another profitable year for the crop insurance market thanks to the improved government reinsurance scheme and reduced losses from natural disasters. The crop insurance market maintained a stable loss ratio of 54% in 2022 by securing the revised scheme structure, transferring major perils, such as spring frost, to the government, and improving the profit-loss distribution method. However, despite a significant decrease in heatwave losses through strengthened loss assessment and improved pricing, livestock insurance experienced a higher loss ratio of 79% compared to the previous year due to a few exceptional fire accidents at sheds.

The agricultural machinery insurance market showed continuous growth on the back of an increase in sales, which helped us boost our gross written premiums by 4% to KRW 35.9 billion in 2022. After years of continued losses, the market started to turn around noticeably in 2020, and has produced favorable results for a couple of years now thanks to the standardization of loss adjustment manuals and the application of strict underwriting guidelines. Benefiting from this market trend, we achieved a favorable loss ratio of 58% in 2022.

The natural perils insurance market achieved a 61% growth in 2022, supported by effective sales strategies and growing demand for coverage against natural perils. This led to an increase in our gross written premiums from natural perils insurance to KRW 37.2 billion. Despite heavy rain in the Seoul metropolitan area and typhoons affecting the Korean Peninsula in 2022, we managed to bring our losses under control, recording a loss ratio of 30.6%. In point of fact, Typhoon Hinnamnor had high intensity, but its impact was not as severe as the 2019-2020 typhoon loss years because it shifted away from the southern part of the Korean Peninsula. It brought losses of KRW 3 billion to the natural perils treaty, 50-60% lower than the losses incurred during 2019-2020.

In 2022, our overseas agriculture business continued to have a rough patch due to loss creep from 2019 and Brazil’s severe drought in 2021. The impact of global climate change also undermined our overseas business results, pushing the loss ratio to a record high of 166% in 2022. As we exited non-profitable markets, our premium income for the year decreased to KRW 32 billion compared to KRW 52.9 billion in the previous year.

In 2023, Korean Re will prioritize portfolio management to deliver profit over top-line growth based on selective underwriting. In the face of unfavorable overseas business conditions, we will continue our efforts to find new markets and build a more diversified and profitable portfolio with the aim of putting our overseas business back on solid footing. Domestically, we will not waver from our commitment to promoting the growth of the government-sponsored agricultural insurance market, thereby facilitating the growth of our business.