On the morning of the 16th, fire and police officials are moving for the first inspection at the SK Corporation C&C Data Center fire site in Sampyeong-dong, Bundang-gu, Seongnam-si, Gyeonggi-do. [Image source=Yonhap News]
[Asia Economy Reporter Changhwan Lee] As Kakao suffers significant damage from a data center fire, interest in insurance compensation is also growing. SK Inc. C&C, which operates the data center, is expected to receive partial compensation from insurance companies, and Kakao is likely to claim subrogation rights against SK Inc. C&C for the damages they incurred.
According to the financial investment industry on the 17th, Kakao is estimated to incur losses of around 20 billion KRW in daily sales due to the recent data center fire.
KB Securities stated in a report on the same day that the simple estimated damage to Kakao from the fire is expected to be about 22 billion KRW in daily sales losses. The fire caused disruptions to Kakao's major services such as KakaoTalk, Daum portal, KakaoT, Melon, KakaoPage, and Kakao Games, resulting in losses not only for citizens but also for self-employed individuals and businesses.
Samsung Securities also analyzed in a report that the fire damage could reduce Kakao's Q4 sales by up to 1-2%. However, since SK Inc. C&C was responsible for fire management, the possibility of damage compensation remains.
On the afternoon of the 15th, firefighters were busy moving around Building A of the SK Pangyo Campus in Sampyeong-dong, Bundang-gu, Seongnam-si, Gyeonggi Province, where a fire broke out. [Image source=Yonhap News]
SK Inc. C&C is understood to have subscribed to comprehensive insurance that covers losses caused by fires or disasters. It is known to have contracts with multiple insurance companies to spread the risk. However, the exact scale of insurance compensation and whether third-party liability insurance was also subscribed to have not been disclosed.
If the insurance compensation is not substantial, SK Inc. C&C will likely have to directly compensate for a significant portion of the damage caused by this fire, increasing the company's burden.
In the case of Samsung SDS, which experienced a fire at the Gwacheon Data Center in 2014, the insurance payout at that time was about 31.8 billion KRW. Considering the damage to IT facilities and buildings caused by the fire, as well as the compensation paid by financial institutions using the data center to affected customers due to system downtime, the amount of insurance paid was evaluated as not large.
The damage from the recent Pangyo Data Center fire is expected to be greater than that incident, so considerable controversy is anticipated regarding the scale of damage and responsibility.
Kakao is expected to directly compensate those affected by the suspension of its services for the time being. Kakao formed an emergency response committee immediately after the data center fire and plans to assess the damage and proceed with compensation. After compensating for the damage, it is highly likely that Kakao will claim subrogation rights against SK Inc. C&C.
In 2014, Samsung Card, which suffered damage from the Samsung SDS data center fire, demanded compensation for business interruption damages and subsequently claimed subrogation rights the following year.
An insurance industry official said, "Since the fire recovery work has not yet been completed and the damage is ongoing, an accurate assessment of the damage scale is necessary," adding, "It is highly likely that Kakao will directly compensate for the damage and later claim subrogation rights against SK Inc. C&C."
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