Disaster liability insurance is one of the compulsory insurance plans in Korea, which covers against third party bodily injury and property damage as a result of disasters arising from fire, explosion or collapse of buildings. A specified group of businesses
or organizations are required to purchase the insurance in accordance with the Framework Act on the Management of Disasters and Safety, which is a law designed to ensure effective disaster prevention, response and recovery on a national level.
This requirement, which came into effect in January 2017, applies to 19 types of private or public operations and certain apartments, including restaurants on the first floor, lodging businesses, funeral homes, gas stations, museums, art galleries and libraries. The government is working on ways to expand the types of premises subject to the disaster
liability insurance requirement particularly with regard to apartments or multi-family residential buildings so that a wider range of properties are covered against disaster liability.
As of late December 2018, the number of the premises subject to the requirement was 172,417, and 92.8 percent of them were restaurants, lodging businesses and filling stations. Around 98 percent of the premises subject to the requirement carried the insurance, with libraries and museums showing slightly lower take-up rates of 94.8 percent and 95 percent respectively.
Disaster liability insurance is available through 14 local non-life insurers and cooperatives, and total premiums written in 2018 amounted to KRW 14.4 billion. More than half of the total premiums were written by big four insurers – Samsung Fire &
Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance and KB Insurance.
Throughout 2018, a total of 187 claims (or KRW 2.6 billion) were paid, with the most claims involving apartments (84), followed by restaurants (45) and lodging businesses (43). In terms of payout amount, lodging businesses topped the list at KRW 1.4 billion mostly due to losses from an arson event at a local inn on January 20, 2018. As a result,
the loss ratio was particularly high among lodging businesses at 36.7 percent, as opposed to an overall loss ratio of 18.2 percent.
The limits of liability are KRW 150 million per person for bodily injury and KRW 1 billion for property damage. The bodily injury limits apply per person.