S&P says insurers can absorb South Korea wildfire losses

The fire was the worst on record since 1987.

South Korea’s “worst wildfire on record since 1987” is expected to result in moderate claims for property and casualty insurers and reinsurers, according to S&P Global Ratings. 

Whilst the impact will dent underwriting results, insurers rated by S&P are seen as capable of absorbing the losses due to strong reinsurance cover, diversified operations, and solid capital positions.

The fire, which burned for about nine days and was largely contained on 30 March, destroyed around 48,000 hectares of mostly forested land in the country’s southeast. Nearly 30 people died, and thousands of rural homes were damaged.

Whilst the immediate claims are manageable, the insurance industry may face earnings pressure in 2025 if further extreme weather events occur. South Korea is vulnerable to typhoons and heavy rainfall during the summer months. 

An increase in catastrophe frequency could also lead to higher reinsurance costs, potentially squeezing insurer margins.

S&P noted that rising public awareness of climate-related risks may drive greater demand for insurance coverage, which would require insurers and reinsurers to enhance their risk management and underwriting capabilities.