The Financial Services Commission announced support measures related to war risk insurance for 10 vessels owned by small and midsize shipping companies waiting in the Strait of Hormuz. Ten domestic non-life insurers will jointly underwrite war risk insurance to reduce excessive premium burdens and concerns about coverage denials.
On the 21st at the Korea Non-Life Insurance Association's open conference room, Financial Services Commission Chair Lee Eog-weon presided over an "industry-financial sector meeting for sectors hit by the Middle East situation" with the shipping industry, policy finance institutions, and the insurance sector, and announced support measures for shipping.
Ten domestic non-life insurers will provide war risk insurance for passage to 10 vessels owned by small and midsize shipping companies waiting in the Strait of Hormuz through a co-insurance arrangement. The aim is for domestic insurers to guarantee those vessels' passage through the Strait of Hormuz without relying on overseas reinsurance. Participating insurers are 10 companies, including Hyundai Marine & Fire Insurance, Samsung Fire & Marine Insurance, Meritz Fire & Marine Insurance, KB Insurance, and Hanwha General Insurance, and they will share the risk on a proportional basis according to market share based on gross written premium.
The support applies to 10 vessels owned by small and midsize shipping companies waiting in the Strait of Hormuz. Large shippers were excluded in light of limits on domestic insurers' collateral capacity, potential trade disputes, and their negotiating power with reinsurers. The coverage scope is war risk insurance for passage through the Strait of Hormuz, and standard underwriting requirements, such as a voyage plan, must be met.
The insurance rate will be set at the lowest level among the rates applied to domestic shippers, including large ones. If it is confirmed after the contract that another domestic vessel received a lower rate, the lower rate will be applied retroactively through a premium refund. The benchmark is the total insurance rate calculated by a reinsurer with both S&P and AM Best credit ratings of A- or higher.
Procedurally, a shipowner may request rate quotes from both the existing insurer and the Korea Non-Life Insurance Association. If the existing insurer declines coverage, co-insurance proceeds. Even if the existing insurer calculates a rate, the shipowner may apply for co-insurance if the co-insurance rate is more favorable. In that case, respecting the existing contract relationship, the existing insurer sets the priority share, and co-insurance proceeds for the remainder.
The support totals about 300 billion won, and if necessary, will continue during the war even after passage. If needed, changes to the support recipients may be made in consultation with the Ministry of Oceans and Fisheries.
Financial support will also be expanded to address the short-term crisis stemming from the Middle East war. The Korea Asset Management Corporation (KAMCO) will broaden the ship fund's eligibility to include small and midsize shippers hit in the Middle East and increase the annual support size from the existing 200 billion won to 250 billion won per year in 2026–2027. For shippers introducing eco-friendly vessels, the loan-to-value (LTV) ratio for ship collateral will be relaxed up to 80%. The cap will rise from 60% to 70% for secondhand vessels and from 70% to 80% for newly built vessels.
Policy and private-sector financial support will proceed in parallel. The Financial Services Commission said it expanded the size of policy finance support programs by 300 billion won to a total of 25.9 trillion won to ease funding difficulties for corporations affected in the Middle East, and that private financial institutions plan to meet on-site demand with their own support measures totaling more than 53 trillion won.
Measures to strengthen mid- to long-term competitiveness are also included. The Korea Development Bank is operating the KDB SOS Fund totaling $1.4 billion to support small and midsize shippers' transition to eco-friendly and smart vessels. The plan is to back industry competitiveness through support for purchasing and retrofitting eco-friendly vessels and cash-flow-based financing. KAMCO also plans to expand its shipping-focused ESG management diagnostic consulting program.