In 2020, our domestic engineering business recorded double-digit growth for the second consecutive year. We reported premium income of KRW 184 billion, representing a remarkable 25% growth compared to the previous year. This strong growth marked a significant breakthrough from the long recession of the domestic engineering insurance market especially considering the harsh conditions over the last year due to COVID-19.
In the year ahead, there is much to be optimistic about. Firstly, the government plans to increase the nation’s social overhead capital (SOC) in order to help the economy recover from the pandemic-induced slump. The government has increased this year’s budget for SOC by 14.1% to KRW 26.5 trillion. In addition to the government’s direct spending in infrastructure development, many pending mega projects will likely be approved sooner than planned, facilitated by the government’s infrastructure drive, with some projects getting off the ground in 2021.
Secondly, the government announced plans to boost the renewable energy sector over the years to come. Renewable energy capacity in Korea stood at 21.3GW in 2020, and the government intends to bring this number up threefold to 60.8GW by 2030.
Since Korean Re is offering reinsurance programs that encompass coverage for construction and operation of renewable power plants, the upcoming growth of the renewable energy sector can be a positive signal for our business growth as well as for the expansion of the domestic engineering insurance market.
We at Korean Re will strive to take these favorable market conditions to our full advantage and drive our top-line growth while also seeking to maintain profitability based on rigorous risk analysis and management in the coming year.
When it comes to the overseas construction business, Korean construction companies have been struggling with low oil prices and intensified competition for the past several years. However, the slump in the construction business appears to have bottomed out. The total value of Korean builders’ overseas construction orders rebounded to USD 35 billion in 2020, after reaching their lowest level in 2019.
In order to respond quickly to this market improvement, Korean Re focused on rebuilding its portfolio and implemented selective underwriting guidelines. Although the size of our overseas book of business decreased slightly in 2020 compared to the previous year as a result of portfolio rebalancing, its profitability is expected to improve in the long run through qualitative business growth.
We also expect to benefit from a positive pricing environment where upward momentum is building continuously. Following an unprecedented number of large losses in recent years, the market size has been greatly reduced in some regions, pushing up premium rates. Moreover, the global engineering insurance market has been faced with extraordinary circumstances due to the COVID-19 pandemic, which has been accelerating market hardening.
In the current engineering insurance market where challenges and opportunities coexist, Korean Re will remain focused on improving profitability by strengthening risk engineering and tightening underwriting standards. At the same time, we will continue to cooperate with many strategic partners and key clients across the globe so that we can deliver value to them while promoting our business growth.
Gross Written Premiums: Engineering
(Units: KRW billion, USD million)
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