As ships are being attacked one after another in the Strait of Hormuz amid war between the United States and Israel and Iran, the Financial Supervisory Service is determining whether non-life insurers that sell marine insurance have purchased reinsurers' war cover. Because reinsurers' marine products do not fully cover losses from incidents caused by military conflict, they must be re-enrolled in more expensive war-related products.
According to the financial authorities on the 12th, the Financial Supervisory Service (FSS) recently asked major non-life insurers that sell marine insurance, including Samsung Fire & Marine Insurance, DB Insurance, and Hyundai Marine & Fire Insurance, to confirm whether they have purchased reinsurers' war cover. Reinsurance means transferring all or part of the liability under an insurance contract to another insurer. Typically, insurers buy reinsurance to prepare for situations in which a large claim must be paid due to a major accident. The FSS has found that most non-life insurers have purchased reinsurers' war cover.
Risks within the Strait of Hormuz have been growing since the U.S. airstrike on Iran. The strait carries 20% of the world's crude oil shipments, with heavy vessel traffic, and the only waters deep enough for very large crude carriers are within Iran's area. Iran, having been attacked by the United States and Israel, is attacking ships transiting the Strait of Hormuz. About 20 Korea-flagged ships are also said to be operating in the Strait of Hormuz.
Generally, marine insurance includes a rider that covers wartime situations. However, when the likelihood of actual military conflict is high, insurers give shipping companies a 72-hour grace period and then require them to purchase a war-risk rider with a higher premium. If they do not enroll, losses due to war are not covered.
If a non-life insurer has not purchased a reinsurer's war cover and an accident occurs, its claims burden rises sharply. A very large crude carrier (VLCC) costs between 10 billion and 20 billion won, and if an accident occurs, amounts above that must be covered.