UK insurance giant Lloyd’s of London has reached an agreement with Korean reinsurance company Korean Re on the stalled compensation payments worth more than 100 billion won (US$89 million) for victims of the Sewol ferry accident, industry sources said on May 16.
The ferry sank 25 kilometers from Jindo, South Jeolla Province, on the southwest coast in 2014, claiming 304 lives, including 250 high school students.
Sewol’s operator Chonghaejin Marine purchased insurance policies for up to 350 million won per passenger or a combined 150 billion won from the Korea Shipping Association. In order to hedge risks, the association signed reinsurance contracts with Samsung Fire & Marine Insurance and Korean Re. The two Korean companies in turn bought reinsurance policies worth 150 billion won from Lloyd’s.
Lloyd’s had argued that the operator is accountable for the disaster because it failed to run the ferry as per rules and regulations. The compensation is supposed to be offered in the case of disaster. According to related global regulations, an insurance firm is exempted from compensation if a ferry sinks due to the operator’s fault.
In April, a Korean delegation consisting of representatives of the insurance firms and the government visited the UK to discuss the issue with Lloyd’s.
“Lloyd’s agreed to pay the compensation after gauging its relations with the Korean government and business ties here,” an industry source close to the matter told The Investor.
A Korean Re spokesperson also confirmed the decision but declined to further elaborate on the exact amount and payment date.
The latest agreement marks the end of two years of negotiations over the eligibility of insurance claims due to faulty operations by the ferry owner.
By Park Ga-young (email@example.com