ENGINEERING

After three consecutive years of negative growth, our domestic engineering business surged ahead in 2019, reporting KRW 148.1 billion in gross written premiums, up 17% from the previous year’s total of KRW 126.6 billion. This is mainly because large-scale infrastructure projects in the public and private sectors that were initially pending were finally authorized by the Korean government. This marked a recent shift toward infrastructure expansion by increasing its budget for infrastructure construction by 4.2% after three years of cuts. Market hardening and raised rates also contributed to delivering strong numbers in 2019.

In 2020, experts believe it will be another promising year for the engineering insurance market. To revitalize stagnant economic activities, the government increased its 2020 SOC budget by a staggering 17.6%.

Nearly KRW 30 trillion worth of infrastructure projects for constructing roads and railways—which up until now have been left in the planning stages—are projected to be reactivated. Given the government’s drive to commence these public works as early as possible, most of these projects are likely to get started and become insured sometime within 2020.

Korean Re expects to secure a leading position in providing reinsurance for officially launched mega-scale projects, such as construction of the privately owned GTX (Great Train Express) lines, high-speed inter-city trains, and the New Ansan Line, another high-speed subway line between Seoul and Ansan, a suburban industrial city just outside of the nation’s capital. We will work hard to ensure the rebound we achieved in 2019 will continue into 2020 and beyond.

Since the peak in overseas construction orders worth USD 71 billion in 2010, Korean builders have suffered from a slump in oil prices and increased competition. In 2019, we saw a steep fall in overseas orders for Korean construction projects, to USD 22 billion, down 31% year on year. Despite the years of downturn weighing on our portfolio growth, we did not lose focus on portfolio diversification and restructuring. As a result, we reorganized the occupational and territorial mix of our overseas portfolio, while also producing gross written premiums consistently at around USD 100 million.

Over the past two years, the international construction insurance market has undergone a profound transformation. After being impacted by unprecedented numbers of large loss events, we have seen a significant outflow of capacity from direct and facultative insurers, followed by hardening across the market.

Against these changing market dynamics, Korean Re will continue to focus on quality accounts and long-term profitability based on stricter risk assessment and more stringent underwriting. At the same time, to grow our business in a healthier and more sustainable way, we will pay greater attention to long-term relationships with strategic partners and key clients across the globe.