Country Profile South Korea - www.lloyds.com/SouthKoreaMI April 2014
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Country Profile South Korea www.lloyds.com/SouthKoreaMI April 2014 tom.grace@lloyds.com
KEY FACTS
FULL NAME / CAPITAL CITY: Republic of Korea / Seoul GDP (PPP): US$ 1,598bn (Global Rank #13)
LANGUAGE: Korean, English widely understood POPULATION: 48.9m (Global Rank #26)
IMF CATEGORISATION: “Developed”
MAIN EXPORT PARTNERS: China 24%, US 10%, Japan 7% (2011)
MAIN IMPORT PARTNERS: China 17%, Japan 13%, US 9% (2011)
MAIN EXPORTS: Semiconductors, wireless telecommunications
equipment, motor vehicles
MAIN IMPORTS: Machinery, electronics and electronic equipment, oil
2012 Rank 2013 Rank Change in Rank
EASE OF DOING BUSINESS: 8 8 0
COMPETITIVENESS: 24 19 5
FREEDOM FROM CORRUPTION: 40 42 -2
DISASTER YEAR ECONOMIC COST (US$ x 1000)
Storm 2003 4,500,000
Storm 2002 4,200,000
Flood 1998 1,480,000
Storm 2004 570,000
Storm 1995 425,000
Source: Disaster Statistics based on: Prevention Web (2013); Export Statistics based on CIA World Factbook; Doing Business Indicators based on World Bank & World Economic Forum
© Lloyd’s 2
KEY STATISTICS
GOVERNANCE INDICATORS SIZE OF ECONOMY WEALTH PER CAPITA
Percentile Rank (1-100) 2012 Purchasing Power Parity (PPP) basis Purchasing Power Parity (PPP) basis
KR SG HK in International $ bn in International $
3,000 100,000
South Korea Singapore Hong Kong
2,228
2012
2,500
Government Effectiveness 84 100 97 75,000
1,598
43,344
2,000
Political Stability and Absence of
1,189
52 97 80
31,950
Violence/Terrorism 1,500 50,000
24,580
Control of Corruption 70 97 93
1,000
25,000
Regulatory Quality 77 100 100 500
Rule of Law 80 96 91 0 0
2006 2012 2018f 2006 2012 2018f
Voice and Accountability 70 54 67
KR SG HK KR SG HK
TOTAL NON-LIFE DIRECT INSURANCE MARKET* NON-LIFE DIRECT INSURANCE MARKET LLOYD’S GROSS SIGNED PREMIUMS
Premiums in US$ m Premiums in US$ m; by OECD Class Gross Signed Premiums in US$ m; by country of origin
30,000 350
Motor 6,685
20,307
1,286
300
18,840
25,000 4,628
17,849
PA & Health 25,069
250
204
20,000
171
165
15,000
Property South Korea* 200
2012 150
10,000 Liability 25,841 US$ 18.8bn
100
5,000
MAT 50
0 23,655
2011 2012 2013 0
Miscellaneous 2011 2012 2013
KR SG HK
* Excludes Long-Term & Private Annuity KR SG HK
All data, sources & data limitations are available for download at www.lloyds.com/comparecountries; * 2013 total non-life based on CAGR projection
LLOYD’S TRADING POSITION Insurance: No: (with some exceptions)
South Korea Reinsurance: Yes
www.lloyds.com/crystal
Coverholders: No
© Lloyd’s 3BUSINESS ENVIRONMENT
President Park Geun-hye's domestic agenda faces further delays. Park's plans to expand the welfare system have lost momentum in the face of
opposition in the legislature and hostile rhetoric from North Korea in the first quarter of 2013. Moreover, the tax increases needed to pay for increased welfare
spending are likely to face further opposition in the National Assembly, increasing the risk of further legislative delays in 2014.
Good economic performance extends into Q4 2013. South Korean GDP grew at a 3.7% annual rate in the fourth quarter, down from the previous two
quarters but still impressive considering the slow recovery in the rest of the world. The largest contributor to growth was capital expenditures; this was much
better than expected, since investment in equipment generally reflects exports performance and the latter fell in the third quarter. More importantly, the growth
in capital expenditure (capex) reflects improved expectations by the industrial sector, which bodes well for continued growth in 2014.
Cooling regional relations likely to limit South Korea's foreign policy options. Park came to power pledging to pursue trust-building policies with North
Korea. However, hostility from Pyongyang at the beginning of 2013 and a broader cooling of regional relations in the second half of the year, driven by
increasing foreign policy assertiveness by China and Japan, has reduced Seoul's room for manoeuvre in its foreign policy. Relations with North Korea in
particular are unlikely to improve significantly in the first half of 2014.
Bank of Korea (BOK) still holding steady. Economic weakness caused the BOK to lower interest rates in 2012 and 2013. Even after growth began to
strengthen, the policy rate was left at 2.50%. Although low by historical standards, there is as yet no sign of inflation, and the won remains strong. So the next
rate hike will likely be in 2015 at the earliest, assuming the world economy recovers as expected and raises demand for Korean exports.
GROSS DOMESTIC PRODUCT (GDP) TOP-10 SECTORS (BY VALUE ADDED) BUSINESS ENVIRONMENT INFORMATION
(nominal GDP levels in billion US$; Real GDP change) (value added in billion US$ & 2014 Change in real %) (provided by IHS Global Insight, April 2014)
2,000 7% 2013 2014
6.3% TOP SECTORS Value Percentage
6% Added Change
1,500 1. Real estate 323.5 1.0
5%
2. Health and social services 234.5 -1.9
4% 3. Business services 225.0 1.1
3.7% 3.6% 3.7% 4. Public Admin. & Defense 193.7 -1.6
1,000 3.5% 3.4% 3.4%
2.8%
3% 5. Construction 145.3 0.4
6. Education 137.9 0.7
2.0% 2%
500 7. Retail trade - total 137.8 0.3
8. Wholesale trade 108.2 0.6
1%
9. Banking & related financial 80.6 1.5
0 0% 10. Computing & related services 60.5 1.4
2010 2011 2012 2013 2014 2015 2016 2017 2018 Top-10 Total 1647 For daily updates visit: > www.ihsglobalinsight.com
© Lloyd’s 4INSURANCE ENVIRONMENT
2012 MAJOR DIRECT INSURERS 2012 DIRECT PREMIUMS QUICK LINKS / USEFUL SOURCES
(Direct Premiums exclude Motor, Guarantee, Long-Term and (Premiums in US$ m; by OECD Class)
Private Annuity; GWP in US$ bn) Insurance Market Profiles
> www.iii.org/international/profiles
Samsung 1.42 Motor 1,431
817 General Insurance Association
LIG 0.94
PA & Health > www.knia.or.kr
Hyundai 0.90
The Insurance Regulator
Property South Korea*
Dongbu 0.73 > http://english.fss.or.kr
4,643 2012
Chartis (AIG) 0.41
Liability US$ 18.8bn Lloyd’s Agency Network
Nonghyup 0.32
11,661 > www.lloyds.com/agency
MAT Lloyd’s Claims Team
288
Hanwha 0.29
> www.lloyds.com/claims
Meritz 0.26 Miscellaneous
ACE 0.13
* Excludes Long-Term & Private Annuity
Lotte 0.12 BUSINESS CULTURE GUIDE
0 0.5 1 1.5 > http://www.kwintessential.co.uk
Source: Association; https://www.knia.or.kr Source: Association; https://www.knia.or.kr (View Resources > Culture Guide)
The South Korean non-life insurance market is one of the largest in Asia with premiums in excess of US$ 18bn: Driven by the strength of the South Korean economy
and the motor sector, the insurance market has grown significantly in the past six years compared to many of its peers. Long-term business represents a large portion of the
Korean insurance market . Products of this type accounted for 61% of total of the market and are more closely aligned to typical life products.
Strong local players dominate the market: The South Korean market is relatively consolidated, with the industry centred around ‘chaebols’. The word “chaebol” refers to a
South Korean form of business conglomerate. In most cases these are centrally structured, family-owned corporations which control a significant portion of the non-life
insurance market in South Korea. In many cases, chaebols operate alliances between one another, reinforcing the dominance of a handful of players within the market.
Broker market: While domestic brokers were introduced in 1997, followed by the entry of foreign brokers a year later, insurance broking still accounts for less than 1% of
total premium. Commercial Lines are mostly sold through Independent Agents and Brokers and Business Development Executives of the insurers. Some commercial lines
are sold through Personal Lines channel but that would be more of an exception than a rule.
Reinsurance: Korean Re is the dominant reinsurer. In 2012, Korean Re represented 74% of the market share including life reinsurance.
© Lloyd’s 5LLOYD’S BUSINESS
2009-2013 LLOYD’S TOTAL PREMIUMS 2013 LLOYD’S HIGH LEVEL CLASSES
Gross Signed Premiums; Direct versus Reinsurance; in million US$ Gross Signed Premiums; high level classes; in million US$
250 2013 GROSS SIGNED PREMIUMS*
UK Motor 0.0
Total US$ 204m Overseas Motor 0.0
200
Property Treaty 43.8
Reinsurance US$ 193m
150 Property (D&F) 35.3
Direct US$ 11m
Marine 71.2
193
100 148 145
148
*COUNTRY OF ORIGIN PREMIUMS Energy 15.3
110 Policyholders are based or
headquartered in this territory; Casualty 9.2
50
Casualty Treaty 1.1
28
Premiums may be written outside
17 26 17
0 11 this territory; Aviation 18.9
2009 2010 2011 2012 2013
X Not necessarily where risks are located Accident & Health 9.7
Direct Reinsurance X May differ to what is reported to
local regulator (dependent on local requirements). 0 10 20 30 40 50 60 70 80
SOURCE: Market Intelligence based on *Gross Signed premiums; Xchanging (2014); unaudited figures based on country of origin and processing by calendar year; see Appendix for details
Mr Kent Chaplin / Ms Alex Faris
Lloyd’s Asia
Lloyd's Trading Centres provide bespoke services to 8 Marina View
Lloyd’s
Office support the underwriting of business in the region,
#14-01 Asia Square Tower 1
Country Singapore 018960
Type including Lloyd's branded office space, a single Lloyd's Manager
entity and back office services. TELEPHONE: +65 6499 9333EMAIL:
kent.chaplin@lloyds.com
alexandra.faris@lloyds.com
© Lloyd’s 6APPENDIX
MACRO-ECONOMIC & BUSINESS ENVIRONMENT DATA
Source: IMF (www.imf.org/external/data.htm), World Bank (http://data.worldbank.org/), IHS Global Insight.
Notes: GDP data on size and wealth of the economy is reported in Purchasing Power Parity (PPP) terms; this is the most accurate indicator of the true standard of living in
each country and therefore potential demand. To calculate this, GDP is converted from local currency to an international $ currency using PPP exchange rates rather than the
market exchange rate. The PPP local currency-to-international $ exchange rates are determined such that a standard basket of goods has the same price in international $
terms in each country. This adjusts for the differing costs of goods across countries, when converted at market exchange rates.
INSURANCE MARKET DATA
Source: Reported data derived by Lloyd’s Market Intelligence team; original source is regulatory bodies, associations, third party information providers.
Notes: Data is reported in US$. For more information, see www.lloyds.com/comparecountries.
Exchange Rates Note: Where required, data has been converted to US$ using annual average exchange rates as per www.oanda.com.
LLOYD’S PREMIUM DATA
Source: Reported data derived by Lloyd’s; original source is Xchanging (data therefore contains only premiums processed by Xchanging).
Notes: Data is reported is US$, on a calendar year basis and is signed gross premiums. This differs from the data published in the Lloyd’s Annual Report, which is also on a
calendar year basis, but is written gross premiums and sourced directly from Syndicates. Differences are therefore (1) timing inconsistencies between signed and written gross
premiums; (2) inconsistent use of exchange rates by Syndicates and Xchanging; & (3) incompleteness of Xchanging data set for certain classes of business (a substantial
amount of premium is not processed by Xchanging and missing from the REG 258 data set; this comprises, for example, UK Motor).
Exchange Rates Note: Data has been converted to US$ using monthly exchange rates provided by Xchanging.
Definitions:
Gross Signed Premiums: Original and additional inward premiums, plus any amount in respect of administration fees or policy expenses remitted with a premium but
before the deduction of outward reinsurance premiums.
Calendar Year: Relates to the calendar year in which the premium, additional or return, is processed by Xchanging. This is irrespective of the actual underwriting year of
account, which is determined by the inception date of each risk.
Country of Origin: Denotes the domicile of the insured party (i.e. the coverholder or policyholder). This is the country from which demand for the insurance / reinsurance
emanates, & is irrespective of the country to which the risk is classified for regulatory reporting purposes.
Example: A policy holder in the UK insuring a holiday home in France would be classified as a UK risk by “Country Of Origin”, but “French” for regulatory reporting
purposes. Similarly a risk incepting on 1st December 2007 would be classified at 2007 “Underwriting Year of Account” but may not be processed by Xchanging until 2008
and so be allocated to the 2008 “processing year”.
ACCESSING THE DATA: to access the raw data in this document, and equivalent data for other countries, see www.lloyds.com/comparecountries.
DISCLAIMER: This document is intended for general information purposes only. Whilst all care has been taken to ensure the accuracy of the information, Lloyd's does not
accept any responsibility for any errors or omissions. Lloyd's does not accept any responsibility or liability for any loss to any person acting or refraining from action as a
result of, but not limited to, any statement, fact, figure, expression of opinion or belief contained in this document.
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