As heat waves continue day after day and heat-related illnesses surge, local governments are moving to introduce "climate insurance" that covers climate disaster damages. Insurers are also rolling out mini policies that cover losses from abnormal weather, as climate risk emerges as a new source of insurance demand.
According to the insurance industry on the 13th, Gyeonggi Province last year became the first in the nation to introduce climate insurance for all residents. About 14.4 million Gyeonggi residents, including registered foreign nationals, are automatically enrolled without separate sign-up, and this year's premium of about 3.2 billion won is fully covered by Gyeonggi Province. Since it took effect in Apr. last year through the end of May this year, 1.26 billion won in benefits has been paid on about 52,000 cases.
Gyeonggi Province's climate insurance broadly covers illnesses and accidents caused by climate change, such as heat waves and cold snaps. It pays 150,000 won each upon diagnosis of heat- or cold-related illness, and 200,000 won upon diagnosis of certain climate-related infectious diseases. If a weather advisory or natural disaster leads to a diagnosis of at least four weeks, a 300,000 won accident consolation payment is provided, and 3 million won is paid in the event of death due to heat- or cold-related illness or climate disaster.
Jeju Province last month became the first in the nation to introduce climate insurance that compensates income losses for daily construction workers who cannot work due to heat waves. Those covered are daily workers enrolled in the retirement mutual aid plan who work at construction sites worth at least 100 million won ordered by public institutions such as Jeju Province and administrative cities. If a heat wave warning halts work, they can receive benefits without separately proving actual losses, with payouts of about 17,000 won per hour of stoppage, up to four hours a day (68,000 won). The project budget is 1 billion won over three years, with 900 million won supported by the insurance industry's mutual growth fund and 100 million won borne by Jeju Province.
Insurers are also launching small, short-term mini policies for individuals that cover climate risks such as heat waves and cold snaps. Tongyang Life Insurance on the 3rd released a product with premiums in the 100 won range that pays 100,000 won each upon diagnosis of heat- or cold-related illness. NH Nonghyup Life is also offering an insurance product that covers farmers' heat-related illness damages.
Driving attention to climate insurance are the growing economic losses from abnormal weather. According to the Korea Insurance Research Institute, the global average annual economic loss from climate disasters rose from $89.3 billion (about 126 trillion won) in the 2000s to $167 billion (about 236 trillion won) in the 2010s. In the 2020s, it has increased to $218.9 billion (about 310 trillion won). In just over 20 years, the average annual loss has swelled about 2.5 times.
An insurance industry official said, "Climate insurance began to emerge in earnest last year, so the market size is not yet large, but demand is expected to gradually grow as abnormal weather such as heat waves and cold snaps continues," and added, "Some local governments are actively discussing introducing climate insurance tailored to regional characteristics."