South Korea to Launch Weather-Indexed Insurance for Traditional Market Merchants Next Month

Traditional market merchants in South Korea will soon have a new form of financial protection against weather-related income losses. KB Sonbo Insurance Co., Ltd. announced it will launch the country’s first “index-based weather insurance” product for merchants next month.

Unlike conventional flood insurance, which requires proof of property damage, this policy provides predetermined compensation when weather conditions exceed specified thresholds. The coverage includes heatwaves, heavy rainfall, and cold waves, offering payouts based on pre-set criteria rather than documented losses.

For rainfall, daily compensation ranges from 20,000 Korean won if precipitation exceeds 10mm to a maximum of 50,000 won for 80mm or more in a single day. Cold wave payouts start at 5,000 won per day when temperatures drop below -8°C, increasing to 35,000 won if temperatures fall below -13°C. Heatwave coverage begins at 15,000 won per day when temperatures surpass 33°C. Policyholders can select thresholds for each weather condition, with premiums adjusted accordingly.

The insurance also streamlines the claims process, reducing the payout period from two weeks under traditional flood insurance to three to five days. The initiative aims to provide market merchants with quicker financial relief during extreme weather events, addressing the growing challenges posed by climate variability.

This innovative insurance product marks the first time South Korean merchants can receive compensation tied directly to weather indexes, reflecting an emerging approach to risk management in the retail sector.