Insurers dodge the bullet on Samho

Although the whole nation watched in awe at the dramatic rescue of the Samho Jewelry, some were happier than others.

Local nonlife insurers and reinsurers had to help bear the financial burden when Samho Shipping was forced to pay a large ransom when one of its ships was previously seized by pirates last year.

But they emerged unscathed from large damage claims when it came to the Samho Jewelry’s insurance policy.

According to nonlife insurers involved in the Samho Jewelry’s insurance coverage, the ship had been insured for up to $45 million.

Samsung Fire & Marine and Green Insurance, both local nonlife insurers, had shared coverage for the Samho Jewelry, Samsung covering 60 percent and Green Insurance the rest.

However, company representatives said these insurers have subsequently reduced their exposure. Samsung and Green “had passed on 95 percent of the coverage to reinsurers, so [both firms] bear responsibility for only 5 percent of the cost of damages,” said Jeon Bu-yeon, a spokesperson for Green Insurance. “So there is a minimal insurance payment involved.”

In addition, the Samho Jewelry only sustained partial external damage when it was seized and then rescued, further limiting the cost of the insurance payments. The companies said that they have yet to tabulate the exact cost of the payment.

This is a far cry from the case of the Samho Dream, which was seized by Somali pirates last April.

The incident dragged on for months and ended in $9.5 million worth of ransom payments for the return of the crew, for which nonlife insurers reimbursed shipowner Samho Shipping.

Among reinsurers that bear responsibility for coverage of the Samho Jewelry, domestic reinsurer Korean Reinsurance has emerged completely unscathed from the incident.

Among many categories of insurance for which the Samho Jewelry was covered, Korean Re was not responsible for “war risk” coverage, which includes damages incurred by acts of war, which would include attacks by Somali pirates.

It was only liable for standard “hull insurance” that ensures the costs of fixing broken ship parts plus “disbursement insurance,” or coverage for increased costs in operating the ship.

Among Korean Re’s insurance portfolio, insurance coverage of ships accounted for 319.9 billion won ($286.6 million), or 7.5 percent, of its total acquired insurance payments of 4.26 trillion won in fiscal 2009.

The market for ship insurance in Korea is a sizable one, estimated at between $200 million to $250 million in fiscal 2009, according to Korean Re.

By Lee Jung-yoon [joyce@joongang.co.kr]