Five Korean companies and many foreign businesses may have to pay more than $1 billion in compensation for losses in the Jeju Air accident.
Korean financial officials said the total compensation for the parties involved in the Jeju Air accident was about 1,525 billion won (1.03 billion USD). Of which, the compensation limit for product liability insurance is 1,472 billion won (1 billion USD) and for aircraft damage is 53.7 billion won (36.5 million USD).
Product liability insurance compensation will be paid by 5 companies, including Samsung Fire & Marine Insurance, KB Insurance, DB Insurance, Meritz Fire & Marine Insurance and Hana Insurance. These are 5 businesses participating in Jeju Air aircraft insurance. The specific pay level of each company has not been determined.
However, these 5 companies do not have to pay all compensation. Normally, they will buy reinsurance from foreign businesses. Reinsurance is the process by which an insurance company transfers part of its liability to a third party. In this way, they can reduce risks, help improve capital management and ensure financial stability.
The tail of the Jeju Air plane at the scene at Muan Airport, South Korea, December 29. Image: Yonhap
At a press conference on December 29, Mr. Song Kyung-hoon – head of management support at Jeju Air said the airline will provide all necessary help to the victims and their families, thanks to this billion USD insurance.
Korean authorities have established a system to check the insurance status of passengers to provide maximum protection to victims in the tragedy. They also ensure that the 5 insurance companies above provide full and timely compensation to the families of the deceased and injured.
Insurance companies affirm that they will compensate the victim’s family as soon as their identity is verified. The injured were also promptly paid for their medical expenses.
Finance officials also established a quick compensation center. The center will confirm whether victims have signed up for any personal insurance, for example travel insurance. Insurance companies are also instructed to prioritize consideration and payment to victims in this accident.
On December 29, Jeju Air’s Boeing 737-800 did not release its landing gear but landed on its belly, slid on the runway and crashed into a concrete wall at the edge of Muan airport. The plane then caught fire, killing 179 of the 181 people on board. This is the first fatal flight of Jeju Air – a low-cost airline established in 2005. They are currently the third largest airline in Korea, measured by number of passengers.
In the morning trading session of December 30, Jeju Air shares decreased by 15.7%, the lowest since the airline listed in 2015. Currently, the decrease is only 8.4%. AK Holdings shares – parent company Jeju Air also dropped 12%, the lowest in 16 years.