FSC revises fire insurance, extends scope and coverage to other building types

This revision aligns with the compulsory fire insurance requirement in Korea.

In September 2023, the Financial Services Commission (FSC) approved the revision of the joint underwriting agreement for special building fire insurance, as requested by the Korean Fire Protection Association (KFPA). This change aims to expand eligibility for joint underwriting and broaden coverage beyond fire damage, the Korean Re reported.

Initially approved in 2021, the joint underwriting agreement between KFPA and non-life insurers enables collective underwriting for high-risk businesses, ensuring coverage for those facing difficulties in obtaining it through standard markets.

The revision extends coverage to apartment complexes and other multi-family residential buildings, which were not classified as special buildings by law.

The scope of coverage has also been widened to include losses beyond fire damage, encompassing natural disasters, building collapse, and water-related issues as desired by policyholders. 

This revision aligns with the compulsory fire insurance requirement in Korea for special buildings, ensuring coverage for risks like third-party death, bodily injury, and property damage caused by fire.

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Special buildings include commercial structures with 11 stories or more, certain apartment complexes, buildings with specific functions or large floor areas, government-owned buildings, and indoor shooting ranges. 

The revised agreement seeks to increase the fire insurance take-up rate, especially for high-risk special buildings that face challenges in obtaining coverage.

To address these challenges, the FSC introduced joint underwriting through the KFPA in 2021. They also collaborated to create a search system for fire insurance applications, allowing insurers to access applications declined by other insurers. 

This system streamlines the process for insurance buyers, ensuring compliance with the law without contacting multiple insurers. Applications not accepted through the search system are automatically placed in the joint underwriting group led by the KFPA.