South Korea to come up with more weather-based insurance policies

Weather bureau and insurance think-tank to cooperate in gathering data and formulating guidelines for new policies

South Korea to come up with more weather-based insurance policies

Insurance News

By Gabriel Olano

A South Korean government agency wants insurance companies to release more weather-based insurance products due to climate change and unpredictable weather.

The Korea Meteorological Administration (KMA) recently requested the Korea Insurance Development Institute (KIDI) study how to develop insurance products that are linked to weather parameters.

“As more weather damage has been reported in recent days, insurance products can be a way to hedge risks regarding the weather,” a KMA official told the Korea Times. “So far, Korea’s weather-related insurance is mostly for crops. The policies are to suggest various other areas that can be covered by insurers.”

The KIDI said that it will conclude this study soon, possibly within this year. Once the study is finished, the institute will forward a report to the government. Meanwhile, the KMA expects that the results of the study will encourage insurers to develop weather-related policies because the data will make setting premiums and fees easier.

This is not the first effort the government has made to promote weather-based insurance in Korea. In 2014, financial authorities loosened regulations on weather related insurance policies so that more insurers would turn weather information into indices, but uptake among insurers was quite low.

In the past, some Korean insurers released conditional weather policies to compete with other firms’ marketing stunts, such as offering discounts if the national football team reached the quarterfinals of the World Cup. However, some of the policies veered into the territory of gambling, and these were subsequently removed.

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