Engineering

In 2024, the government increased the Social Overhead Capital (SOC) budget by 5.6% to KRW 26.4 trillion in an effort to counter an economic downturn. However, the construction industry continued to struggle due to financing difficulties caused by high interest rates and delays in large-scale public projects resulting from political instability.

Against this backdrop, the engineering insurance sector experienced a slowdown in overall growth but saw a significant improvement in profitability, making 2024 its most profitable year in history. This was primarily driven by the absence of major losses and an exceptionally low number of natural catastrophe events during the year. However, despite the favorable loss ratio, the global reinsurance market’s low preference for the Korean market has persisted, showing no signs of improvement. Seizing this opportunity, Korean Re actively pursued an underwriting strategy focused on high-quality risks, thus achieving strong results.

In 2025, the construction industry is expected to remain sluggish due to a 3.6% reduction in the national SOC budget and ongoing political uncertainty. These factors are likely to delay the commencement of numerous public projects. Additionally, with persistently high interest rates, challenges such as delays in private-sector investments and significant cuts in corporate insurance budgets are anticipated, creating a more challenging environment for the engineering insurance market throughout the year.

Meanwhile, the consistently low loss ratio in the engineering insurance sector over the past few years has intensified competition among insurers, which is expected to drive a decline in overall premium rates.

It is worth noting, however, that the government is planning a supplementary budget to revitalize the construction industry. As part of this initiative, large-scale infrastructure projects, such as Gadeok-do New Airport and Great Train eXpress (GTX) Lines B and C, are expected to commence construction. Additionally, long-delayed offshore wind farm projects are likely to move forward.

On a global scale, the surging demand for artificial intelligence (AI)-related industries is driving significant expansion in large-scale AI data centers and related power infrastructure, presenting new opportunities in the insurance market.

Furthermore, if the Russia-Ukraine war comes to an end, potential reconstruction projects could create new business opportunities, particularly for the Korean Interest Abroad (KIA) business.

Despite the uncertainties ahead, Korean Re will continue to leverage its expertise to actively explore new markets and optimize its portfolio, ensuring sustained profitability. Through these efforts, we aim to consistently deliver value to our clients and further strengthen our position as a leader in the engineering insurance market.

Marine & Aviation

In 2024, our marine and aviation business continued its upward trajectory, recording KRW 422.2 billion in gross written premiums—an increase from the previous year. Hull premiums grew by 4.7% year on year to KRW 223.6 billion, spurred by increased shipbuilding contracts, fleet expansion, and additional premiums imposed in high-risk areas due to heightened geopolitical conflicts worldwide. Market dynamics varied by fleet sizes. Although the overall market remained flat for small and medium-sized fleets, an influx of overseas capacity led to further rate softening for large and global fleets, resulting in a steeper rate decline than the previous year.

The volume of cargo premiums increased to KRW 99.9 billion in 2024, representing an increase of 6.2% from the previous year. This growth was primarily driven by the sustained increase in automobile cargo exports and the expansion of new businesses in the defense sector. Meanwhile, aviation premiums surged by nearly 17% year on year to KRW 98.7 billion, bolstered by stable premium rates and the launch of satellites, including military-grade satellites.

Even though inflation remains a key concern for the marine and aviation industry, we have yet to experience any significant inflationary impact. In ship repairs, inflation has minimal influence since repair costs are typically settled within a year. On the other hand, we have observed that long-term cases such as General Average or Liability for Collision can take up to a decade to resolve, making their financial impact harder to track. In the South Korean shipbuilding industry, new order volumes have remained stable, with a notable increase in high-value LNG vessels compared to last year. This trend has sustained both premiums and the value of builder’s risk insurance at elevated levels, a pattern expected to continue in the near future. Additionally, as the defense industry advances and grows, risk exposure is expected to increase, yet profitability in this segment remains strong.

While the degree of rate reductions varied across different lines of business, the overall market followed a softening trend in hull, cargo, and aviation in 2024. Despite this, our bottom line remained resilient, as the absence of major losses helped maintain stability alongside top-line growth.

Looking ahead to 2025, we expect this softening trend to continue, though at a more moderate pace than in 2024 for hull. Fleet volume is projected to remain mostly stable, albeit with growth showing a slight downward trend. On the cargo side, we expect a slight downturn in premiums caused by the global market instability regarding tariffs and geopolitical tension. A decrease in trade volume along with the softening rate trend will further impact the cargo market. Aviation premiums are expected to decrease slightly compared to the previous year due to the base effect of satellite launches.

Given these conditions, alongside our focus on profit-driven underwriting and maintaining pricing guidelines, we will continue to conduct in-depth analyses of loss patterns. This includes examining loss ratios by vessel type, cargo category, and both aircraft and pilot ages. Based on these insights, we will take a strategic approach to renewals, adjusting our exposure through selective increases or reductions to ensure long-term profitability.