[1mm Finance Talk] Agricultural and Fishery Disaster Insurance Reform Gains Momentum Amid Climate Change and Heat Waves

Three Amendments to Agricultural and Fishery Disaster Insurance Proposed in Two Weeks... Two Pass Legislative Subcommittee
Lowering Premium Burden for Farmers and Expanding Covered Items
"Loss Ratios Already Rising"... Insurance Industry Voices Concerns

As natural disasters such as heat waves and wildfires caused by climate change occur more frequently, political parties are rushing to reform agricultural and fishery disaster insurance. Most of the proposed reforms aim to lower insurance premiums and expand coverage, which is welcomed by farmers. However, the insurance industry is concerned that the already unfavorable loss ratios will only become more burdensome.

According to the National Assembly's legislative information system, three amendments to the Agricultural and Fishery Disaster Insurance Act have been proposed in the past two weeks since the end of last month. Of these, two amendments separately proposed by Democratic Party lawmakers Lim Mi-ae and Seo Samseok passed the National Assembly's Agriculture, Food, Rural Affairs, Oceans and Fisheries Committee's subcommittee on legislation on July 10. These bills were previously promoted by the Democratic Party under the previous administration but were discarded after former Acting President Han Ducksoo exercised his right to request reconsideration (veto). However, with the launch of the new administration, the bills have been reintroduced and bipartisan agreement has been reached.

The amendment proposed by Lim includes a provision to add "expansion of insured items due to the climate crisis" to the matters reviewed by the Agricultural Disaster Insurance Deliberation Committee. This committee, which is an advisory body under the Minister of Agriculture, Food and Rural Affairs, reviews the scope of compensation, financial support, and loss assessment procedures for the agricultural disaster insurance system. The amendment also includes a measure to prevent the application of surcharges in the event of a major disaster.

The core of Seo's amendment is to reduce the insurance premium burden on farmers. It stipulates that insurance companies should not apply surcharges for damages caused by natural disasters when calculating insurance premium rates. It also proposes providing at least 80% premium support for small-scale farmers and fishers, and introducing a price disclosure system for agricultural and fishery disaster insurance.

The amendment proposed by People Power Party lawmaker Um Tae-young on July 11 focuses on expanding the range of crops and forest products covered by insurance. Agricultural and fishery disaster insurance, as a policy insurance product, currently only covers certain items designated by presidential decree. There has been growing criticism that, although natural disasters and the diversity of agricultural products have increased due to climate change, insurance coverage has not kept pace. The amendment streamlines procedures so that, in the event of an emergency disaster, insurance can be temporarily applied to affected items without deliberation by the Agricultural Disaster Insurance Deliberation Committee or similar bodies. It also requires the government to annually review and announce whether to expand the list of items covered by insurance.

While both ruling and opposition parties are moving to reform agricultural and fishery disaster insurance, the insurance industry is expressing concern. This is because the already high loss ratios are expected to become even more burdensome.

Agricultural and fishery disaster insurance is divided into crop disaster insurance, forest product disaster insurance, livestock disaster insurance, and aquaculture disaster insurance, depending on the insured item. Among these, crop disaster insurance is the largest, with a subscription rate of 54.2% as of last year. Although the government and local governments subsidize about half of the premiums, many farmers are still reluctant to enroll due to the remaining burden. NH Nonghyup Property & Casualty Insurance exclusively manages this insurance, and the loss ratio reached about 90% last year.

Livestock disaster insurance is sold by seven companies: NH Nonghyup Property & Casualty Insurance, KB Insurance, DB Insurance, Hanwha General Insurance, Hyundai Marine & Fire Insurance, Samsung Fire & Marine Insurance, and Meritz Fire & Marine Insurance. Excluding Samsung and Meritz, the subscription rate for the other five companies was high at 95.4% last year, but the loss ratio was also high at 91%. An insurance industry official said, "Given the nature of policy insurance, the trend of lowering premiums and expanding benefits is likely to continue. However, policies that shift all climate change-related losses onto insurance companies should be avoided."