Review of Natural Catastrophes in Korea
In 2022, Korea suffered the worst flooding in more than 100 years after days of heavy rainfall in August. The unprecedented rainstorm caused record flooding in many parts of Seoul and the surrounding area, with the Gangnam area being one of the worst hit. Heavy rainfall flooded streets, subway stations, buildings, and homes, causing power outage for hours.
While property losses were relatively small due to low levels of insurance penetration among households and small businesses, motor losses peaked with estimated losses reaching KRW 162 billion. More than 11,000 motor insurance claims were filed in the wake of the flooding.
The August flooding driven by torrential rain likely had to do with climate change, according to the Korea Meteorological Administration. Climate change is believed to increase the frequency of large scale atmospheric pressure patterns with little or no movement—referred to as atmospheric blocking. Weather extremes such as heavy rain, cold spells, heat waves, and drought are often associated with atmospheric blocking.
In early September 2022, Korea was struck by Typhoon Hinnamnor, the strongest cyclonic storm for the year. Cities on the southern coast experienced severe damage from the super typhoon, which made landfall near Busan on September 5 and slammed through the southern area, causing ten deaths. The typhoon took a huge toll on the country’s industrial region, with an estimated property damage of KRW 1.7 trillion. It was among the top five strong typhoons that hit Korea in terms of property damage. While Typhoon Hinnamnor ranked 17th in terms of casualties, it was the third strongest typhoon in terms of air pressure (hPa).
The largest insurance claim is expected to come from steel maker Posco, which has lost an estimated KRW 2 trillion in revenue due to the flooding of its hot rolling facilities in Pohang. Following the August flooding, the insurance industry suffered another large motor losses from the typhoon, with over 9,600 vehicles being damaged and estimated insurance claims amounting to more than KRW 77.2 billion.
The combined gross losses of August and September events are estimated to surpass KRW 200 billion, but insurers’ net losses are not likely to be high thanks to reinsurance recoverables.
Typhoons and accompanying rain are the biggest natural perils in Korea. Over a recent ten-year period, approximately 50% of insured catastrophe losses have been caused by typhoon, 35% by torrential rain, 12.5% by weight of snow, and 2.5% by sea surge, according to AXCO.
Korea is hit by multiple typhoons each year, usually in the typhoon season from July to September. On average, the country experiences three typhoons a year. As typhoons normally approach the country from the south, the most vulnerable area is the southern part of the Korean Peninsula, particularly Jeju and Busan. Typhoons generally cause damage to properties by force of wind, but most typhoon losses arise from heavy rain.
In 2021, heavy rain and typhoons accounted for 61.6% and 31.9% respectively of overall property losses from natural disasters. Between 2012 and 2021, typhoons took up the biggest share (47.7%) of annual average property losses from natural catastrophes, followed by heavy rain (45.2%).