The Korean Fair Trade Commission (KFTC) imposed a fine of 7.6 billion won (US$6.8 million) on Korean Reinsurance Co., saying that the company has blocked potential competitors from entering the local aviation reinsurance market for close to 20 years by abusing its market dominance.
Aviation insurance can be defined as a contract between a non-life insurer and a helicopter or small airplane operator. The former’s burden is heavy in the event of an accident and, as such, it usually signs a contract with a reinsurance company after undertaking. In this market, Korean Reinsurance Company’s market share has amounted to 88% for five years.
According to the commission, the company has blocked potential competitors by unfairly treating brokers going between foreign reinsurance companies and South Korean non-life insurers. In addition, the company has signed special retrocession contracts with foreign reinsurance companies that are more likely to enter the South Korean market so that South Korean non-life insurers do business with foreign reinsurance companies via itself. Also, the company caused South Korean non-life insurers to undertake aviation insurance contracts based on insurance premium rates it determined.
Korean Reinsurance Co. is going to mull over how to respond to the measure after related documents are delivered early next year. Its response is predicted to include administrative litigation.