Samsung Fire & Marine Insurance Establishes Industry's First Model for Calculating D&O Insurance Coverage Limits

Partnering with Consulting Firms to Build a Company-Specific Calculation System
Analyzing the Industry, Assets, Listing Status, and Financials of Subscriber Companies
Expanding Regulatory Risks—Accountability Frameworks and Serious Accidents Pun

Samsung Fire & Marine Insurance is set to finalize the establishment of a systematic model for calculating the compensation limit of Directors & Officers Liability Insurance (D&O) within this week. The company is building a system that derives the optimal compensation limit by thoroughly analyzing the financial information and past incident history of the subscriber's company. With regulatory risks targeting executives intensifying—such as amendments to the Commercial Act, the introduction of accountability structures in the financial sector, and the Serious Accidents Punishment Act in the non-financial sector—demand for D&O insurance is surging. The introduction of this model is expected to elevate the compensation limit assessment framework, which has been somewhat ambiguous in the industry until now.

Tailored Analysis by Industry, Assets, Listing Status, and Financials... Expected to Serve as a 'Standard'

According to the industry on July 1, Samsung Fire & Marine Insurance has partnered with a global consulting firm over several months to analyze advanced overseas cases and establish a model for calculating the D&O insurance compensation limit. The industry sees significance in the fact that the company has systematized the calculation framework for D&O insurance coverage amounts, which previously lacked clear standards.

The new model comprehensively analyzes a subscribing company's ▲industry sector ▲total assets ▲listing status ▲financial soundness indicators ▲past incident history, among other factors, to calculate a customized compensation limit. Through a structured logic, it provides a tailored consulting service that suggests the appropriate compensation limit for each company.

A senior official in the non-life insurance sector stated, "Recently, due to amendments to the Commercial Act and other factors, more customers have been acknowledging the need for D&O insurance but remain frustrated because they do not know what an appropriate compensation limit should be," adding, "For example, customers ask insurers how much compensation limit they should set to cover regulatory-related incidents, considering the size of their company and the positions of their executives. However, due to the lack of standards, it has been difficult to provide clear explanations to customers."

Rising Regulatory Risks... Rapid Growth of the D&O Market

The need for such a sophisticated calculation model has arisen because regulations increasing management's legal responsibilities are spreading across both financial and non-financial sectors, driving rapid growth in the D&O insurance market.

According to the Korea Insurance Development Institute, the number of domestic D&O insurance contracts increased by 22.9% from 1,716 at the end of 2021 to 2,109 at the end of last year. During the same period, premium income also grew by 29.1% from 5.6 billion won to 7.23 billion won. The number of related incidents surged by 40.3% from 67 to 94, and the insurance claims paid also resumed an upward trend, rising from 5.8 billion won at the end of 2024 to 13.8 billion won at the end of last year.

This trend is reflected in the performance of major non-life insurers. The direct premiums written for D&O insurance by the top five non-life insurers—Samsung Fire & Marine Insurance, Meritz Fire & Marine Insurance, DB Insurance, Hyundai Marine & Fire Insurance, and KB Insurance—increased by 17.8% from 7.15 billion won at the end of 2023 to 8.42 billion won at the end of last year. At the end of the first quarter of this year, direct premiums written reached 2.25 billion won, which is expected to surpass last year’s annual performance. The number of new contracts also rose by 17.4% from 1,335 to 1,567 over the same period, with 405 new contracts recorded in the first quarter of this year alone.

This expansion in demand is particularly pronounced in the financial sector, where the adoption of internal controls and accountability structures is underway. Among the four major financial groups (KB, Shinhan, Hana, Woori), KB Financial Group has the highest D&O coverage limit at 95 billion won, followed by Woori Financial Group at 70 billion won, and Shinhan Financial Group and Hana Financial Group at 50 billion won each. Woori Financial Group increased its coverage limit by 20 billion won compared to the end of the first half of last year and has recently been the most proactive in utilizing D&O insurance. The insurance covers not only inside directors but also the activities of outside directors during their tenure. A financial holding company official said, "For outside directors, we set the deductible at 20% of the compensation liability, up to a maximum limit of 100 million won."

'Stuck for 30 Years'... Challenges of a Domestic Market That Has Adopted Foreign Policy Terms

Despite rapidly increasing demand, the domestic D&O insurance market faces significant challenges. Chief among them are establishing a clear compensation limit calculation framework and revising policy terms to reflect domestic regulatory environments. Unlike property insurance, D&O insurance does not involve tangible assets or values, making it difficult to calculate appropriate coverage amounts. Even when policyholders inquire about compensation limits, the absence of a standardized calculation system has meant that insurers could only refer to a few past cases when providing guidance.

Policy terms are also a point of concern. Most domestic D&O insurance policies borrow guidelines from foreign insurers such as AIG or Chubb in the US, meaning they do not precisely reflect domestic regulatory risks, such as the Serious Accidents Punishment Act or accountability structures. Regulatory guidelines from financial authorities are also limited, so major non-life insurers have continued to apply standard policy terms based on a single product introduced over 30 years ago, with little change.

The insurance industry expects Samsung Fire & Marine Insurance's latest initiative to serve as a catalyst for establishing D&O insurance standards optimized for domestic laws and regulatory environments.

Another industry official noted, "The D&O insurance compensation limit calculation tool Samsung Fire & Marine Insurance is about to unveil could serve as a much-needed reference within the industry," adding, "The insurance sector needs to strive to develop compensation limit assessment services that are optimized for local laws and regulatory circumstances in response to the growing demand for D&O insurance."

This content was produced with the assistance of AI translation services.