The Financial Supervisory Service is examining whether local nonlife insurers providing marine insurance have adequate war-risk protection amid ongoing attacks on vessels near the Strait of Hormuz due to escalating Middle East tensions. This follows U.S. and Israeli military strikes on Iran, prompting Iranian retaliation against ships. Officials say most Korean insurers have secured reinsurance with war-risk provisions.
The Financial Supervisory Service (FSS) is reviewing whether local nonlife insurers offering marine insurance have sufficient war-risk protection from their reinsurers, as attacks on vessels persist near the Strait of Hormuz following U.S. and Israeli strikes on Iran. This vital waterway handles about one-fifth of global oil shipments, with deep shipping lanes for very large crude carriers lying within Iran's territorial waters.
The FSS recently requested verification from major domestic nonlife insurers, including Samsung Fire & Marine Insurance, DB Insurance, and Hyundai Marine & Fire Insurance, on whether their reinsurance arrangements cover war-related risks. An FSS official stated, “We understand that most Korean insurers have secured reinsurance coverage that incorporates war-risk provisions.”
Standard marine reinsurance contracts typically exclude full compensation for losses from armed conflicts. As geopolitical risks escalate, insurers must often buy separate, far more expensive coverage tailored to war damage. Reinsurance allows insurers to transfer risks to other companies, mitigating potential financial exposure from large claims.
Industry sources indicate about 20 Korean ships are currently navigating the area. Typical marine policies include clauses for war risks, but if military confrontation seems imminent, insurers may give shipowners a 72-hour notice to switch to specialized war-risk policies with higher premiums. Failure to renew means war-related damage is generally not compensated.
Without adequate war-risk backing from reinsurers, insurers could face significant financial exposure in an incident. A very large crude carrier is valued between 100 billion won ($68 million) and 200 billion won, potentially leading to compensation liabilities exceeding that amount if attacked.
Iran's ongoing assaults on Middle East shipping and energy infrastructure have driven oil prices higher, heightening concerns over a global energy crisis.
