Engineering, Marine & Aviation

Engineering

In 2025, the engineering insurance market faced a challenging landscape, characterized by sluggish premium growth amid a prolonged slowdown in construction activity. In Korea, construction investment remained subdued as reduced public-sector spending and the lingering effects of high interest rates continued to delay both public and private-sector projects. Private construction was further constrained by a downturn in the domestic housing market—particularly in regional areas—as well as rising cost pressures caused by sharp increases in material and labor costs.

Meanwhile, intense competition among primary insurers to secure market share has continued. In particular, the severity of natural catastrophe losses—such as large-scale wildfires and heavy rainfall caused by extreme weather conditions—was higher than in previous years, leading to pressure on profitability in 2025.

Despite these headwinds, Korean Re continued to lead the domestic reinsurance market by focusing on risk management and maintaining a stable and sound portfolio. At the same time, we are actively pursuing business opportunities in domestic and international mega-projects, such as offshore wind power, nuclear power plants (including SMRs), and giga-scale data centers, to secure new growth drivers.

These efforts align with emerging signs of recovery in construction-related demand growth toward the latter part of 2025, as the government’s budget signaled a shift toward infrastructure-led growth. Reflecting a more proactive fiscal stance, the total national budget for 2026 was set at KRW 728 trillion, an 8.1% increase from 2025, with the Social Overhead Capital (SOC) budget expanding by 9.1% to KRW 27.7 trillion.

In addition, the rapid transition to an Artificial Intelligence (AI) era is expected to become an important driver of private-sector investment from 2026 onward. Growing demand for AI services is leading to increased investment in AI-related infrastructure, such as data centers, power generation facilities, transmission networks, and other supporting infrastructure globally.

Going forward, Korean Re will actively utilize AI and other technologies to further strengthen underwriting expertise and risk management capabilities, while striving to provide customers with stable reinsurance capacity through a well-balanced and optimized portfolio.

Marine & Aviation

In 2025, our marine and aviation business maintained its upward momentum, with gross written premiums increasing to KRW 427.4 billion. Hull premiums rose by 1.8% to KRW 227.7 billion, reflecting continued growth in the builder’s risk segment, fleet expansion, and additional premiums imposed in high-risk areas amid heightened geopolitical tensions across many parts of the world. This growth came in the midst of market softening, extending the trend observed in the previous year. This softening has been driven primarily by the influx of overseas capacity in large fleet segments, together with the absence of major losses.

As the market softened, cargo premiums declined by 6.4% to KRW 93.5 billion in 2025. The decrease was largely due to continued rate pressure in a soft market environment, along with the effects of U.S. tariff measures on major cargo items, such as steel products. In contrast, aviation premiums grew by 7.5% year on year to KRW 106.1 billion, supported by new business in the defense aviation sector, despite a modest rate reduction driven by global market softening.

Although inflation remains a key concern for the marine and aviation industry, we have yet to experience any significant inflationary impact. In hull insurance, inflationary pressure on claims costs has been limited, as most ship repair claims are typically settled within one year. Moreover, the absence of major losses has reduced the need for large-scale repairs, further muting the impact of inflation. On the other hand, long-tail cases such as General Average or Liability for Collision may take up to a decade to resolve, making their ultimate financial impact difficult to assess in the short term.

In the South Korean shipbuilding industry, new order volumes have remained stable with continued growth in high-value LNG vessels. This trend has supported both premium volumes and the insured values of builder’s risk policies, a pattern expected to persist in the near future. Additionally, as the defense industry continues to expand, risk exposure is expected to increase, with profitability in this segment remaining strong.

While the degree of rate reductions varied by line of business, the overall market came under downward pressure across hull, cargo, and aviation in 2025. Nevertheless, our bottom line continued to demonstrate stable growth and profitability, underpinned by a benign loss experience and sustained top-line growth.

Looking ahead to 2026, we expect the softening trend to persist, with downward rate pressure in the hull segment continuing at a pace similar to, or slightly more pronounced than that observed in 2025. Fleet volumes are projected to remain stable, although overall premium growth is expected to moderate. In the cargo segment, premium volume is likely to remain under mild downward pressure, reflecting ongoing global uncertainty related to tariff policies and geopolitical tensions. Muted trade volumes, together with a soft rate environment, are set to continue to weigh on market conditions. Aviation premiums, however, are expected to record a gradual increase, driven by additional satellite launches and continued growth in new business in the defense sector.

Given these conditions, and consistent with our profit-focused underwriting strategy and pricing guidelines, we will continue to conduct in-depth analyses of loss patterns. This includes examining loss ratios by vessel type, cargo category, as well as aircraft and pilot ages. Based on these insights, we will take a strategic approach to renewals, selectively adjusting exposure to ensure long-term profitability.