Korea to introduce climate insurance next year

Korea to introduce climate insurance next year

최초입력 2025.07.07 10:45:31

(Yonhap)

The South Korean government, in collaboration with the insurance industry, plans to introduce a climate insurance product in 2026 as the country swelters under extreme summer heat every year.
Climate insurance refers to a policy that provides compensation for losses caused by climate change, such as abnormal weather events.
According to a draft of the government’s climate insurance product development plan obtained by the office of Representative Kim So-hee of the People Power Party on Sunday, the government and the industry are developing an index-based climate insurance that guarantees income for outdoor workers unable to work due to extreme heat.
Compensation would be provided based on objective indicators such as heatwave warnings.
The goal is to support vulnerable groups such as day laborers who are directly impacted by extreme weather conditions.
This initiative comes after the Ministry of Environment and the General Insurance Association of Korea signed a memorandum of understanding in April to introduce and promote climate insurance.
According to the Korea Disease Control and Prevention Agency, a total of 633 people suffered from heat-related illnesses between June 15 and July 3, with five deaths reported.
On July 2 alone, 100 people were treated for heat illness - a figure that was only reached on August 1 a year ago.
“We are approaching this issue from the perspective of using insurance as a tool to reduce financial risk and protect those affected by the climate crisis,” said an official from the Ministry of Environment. “Since climate change could lead to losses in livelihood and subsistence among vulnerable groups, our aim is to provide compensation through climate insurance.”
The insurance policy will provide compensation for income losses incurred if work is suspended due to abnormal climate conditions before 1 p.m., in accordance with operational guidelines.
Abnormal conditions are defined as instances in which a heatwave warning is issued.
The contract targets local governments that have agreed to suspend public outdoor work during heatwaves, and the insured individuals are day laborers involved in public projects who are enrolled in a retirement benefit plan.
The General Insurance Association, which is leading the development, has set the insurance payout based on four hours’ worth of wages for a general laborer as defined by the Construction Association of Korea.
The product is being designed to pay out either the full amount or 80 percent of the amount, in consultation with local governments.
As a result, the daily payout would be 84,800 won ($62.25, 100 percent) or 67,800 won (80 percent).
“The climate insurance product is currently about halfway through the development process,” an official from the insurance association said.
The environment ministry is aiming to launch a pilot program in the first half of next year.
It is currently selecting which types of outdoor jobs will be targeted for the program.
Under the program, the government would provide financial support to local governments for insurance premiums, and insurance companies would pay out benefits to insured outdoor workers who meet certain conditions.
“We plan to secure a budget this year and begin the pilot program next year,” said a ministry official. “Based on the results of the program, we will gradually expand it.”
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