The motor insurance market in Korea saw solid growth in 2021, with premium income increasing by 4.0% compared to the previous year. The increased number of registered vehicles led to the expansion in premium income, while the growth also reflected the impact of premium rate hikes that had been implemented in 2020 to keep pace with rising claims costs.
The trend of surging loss ratios came to an abrupt halt in the wake of the COVID-19 outbreak. Following a significant improvement in 2020, the loss ratio further declined by 3.3%p year on year to 82% in 2021. As the implementation of physical distancing measures led to less driving, the frequency of motor insurance claims went down.
Korean Re also experienced benign claims experiences with the loss ratio remaining stable at 79.3% in 2021. Our gross written premiums grew by 10.2% to KRW 669.3 billion in 2021 due to an increase in new business from overseas markets.
Globally, we diversified our non-proportional treaty portfolio with new contracts from insurers in the UK and Eastern Europe that offer motor third party liability coverage. Meanwhile, with regard to the proportional treaty business, we deepened our relationships with existing clients, while selectively supporting new programs.
As we tried to grow both our proportional and non-proportional businesses, we applied very conservative underwriting standards in order to improve the profitability of our overseas book.
Domestically, we were faced with slower business growth, which pushed us to increasingly focus on providing reinsurance solutions that better meet the needs of ceding insurers.
We continuously expanded existing programs that cover higher risks in addition to proportional and non-proportional treaties. We also continued our efforts to boost transactions with mutual associations by strengthening our business relationships with them to find ways to accommodate their needs more effectively.
In 2022, steady growth momentum will be maintained in the market. Direct premiums are expected to grow by 3.0% to over KRW 20.7 trillion, driven by an increasing number of cars. Still, there are some factors that put downward pressure on overall premium growth, such as a growing portion of online distribution channels that offer lower rates and the government’s call for a reduction in premium rates. The loss ratio is anticipated to go up by 1.5-2%p, with a gradual easing of social distancing measures now underway and the use of cars picking up again. Rising auto repair costs may also have an adverse impact on the loss ratio.
Korean Re aims to generate KRW 699 billion in gross written premiums from the motor business in 2022, 4.4% higher than the previous year. To meet this target, we will continue to develop new reinsurance programs and further broaden our business relationships with mutual associations in ways that bring business growth and value to our partners as well as to our company. We will also seek cooperation with insurtech startups to seize on new business opportunities and enhance our client engagement practices. In addition, global business expansion will remain one of our important tasks, as we believe tapping into new markets is crucial for us to drive business growth and build a more profitable and diversified business portfolio.
Gross Written Premiums: Motor
(Units: KRW billion, USD million)
| FY 2021 (KRW) | FY 2021 (USD) | FY 2020 (KRW) | FY 2020 (USD) | |
| Motor | 669.3 | 582.3 | 605.4 | 508.0 |