SEOUL, Oct. 16 (Korea Bizwire) – A new insurance program designed to protect businesses vulnerable to adverse weather conditions is currently being developed by the South Korean insurance industry, according to industry sources.
Sources close to the South Korean insurance sector on Monday said a special task force formed by the Korea Insurance Development Institute along with insurance firms and weather forecasters is working to develop a new weather-based insurance program at the request of the Korea Meteorological Administration.
The special task force consists of a number of insurance firms including Hyundai Marine & Fire Insurance, NongHyup Property & Casualty, Meritz Fire & Marine Insurance and Dongbu Fire, while the Korea Meteorological Institute and other weather forecast service providers from the weather forecasting sector are lending technological help.
The project for the new insurance program currently in development will look into insurance industry market trends in order to cater to businesses particularly vulnerable to extreme weather conditions such as heat waves and monsoon rains.
The new weather-based insurance program will be index-based, which means farmers, for instance, will be able to receive compensation for weather damages caused on their property after the economic losses are calculated in relation to the weather conditions.
However, there are legitimate concerns as to how the damages caused by weather will be calculated, particularly in the retail, home appliance, fashion and leisure industry, as it is hard to identify how much impact weather can have on sales performance.
While sales of ice cream and ice cubes typically surge during the summer, it is hard to establish exactly to which degree they are affected by the weather, as other factors such as consumer confidence must also be considered.
Given the complex nature of the relation between sales and weather, the new project will refer to previous statistics when measuring compensation.
For instance, the amount of compensation given to companies when the temperature hits 40 degrees Celsius will be determined by previous cases under similar weather conditions.
In addition, another type of weather-based insurance program targeting promotional events is also being discussed, which would cover companies that organize weather-dependent events such as a white Christmas.
“Due to the requests to release a complete insurance program as soon as possible, we are focusing on an easier project like solar energy-related weather insurance program in order to encourage participation from other companies,” the Korea Insurance Development Institute said.