Expansion of electric vehicles, ESS and data centers
Emerging fire and disaster risks come to the fore
Absence of compulsory insurance limits loss coverage
Risks persist at existing vulnerable facilities
Aging facilities and inadequate safety equipment are the main causes
Tailored measures using AI safety technology are needed
New types of risk are emerging alongside industrial and technological development. Fires and disasters at facilities in emerging industries, including electric vehicles, energy storage systems (ESS) and data centers, are representative examples. Gaps in safety protection also persist at existing vulnerable facilities, including aging homes, traditional markets and small businesses.
This has prompted continuing calls to reorganize safety management systems. Related industries argue that the existing approach, which has focused on firefighting and damage recovery after accidents, should give way to prevention and continuous risk management.
New risks in emerging industries
According to insurance industry sources on October 26, changes in industrial structure, combined with aging facilities, are changing the direction of fire risk management. In particular, lithium-ion batteries used in electric vehicles and ESS pose risks of cascading explosions and reignition, requiring responses different from those used for conventional fires.
At data centers and large logistics facilities, fire losses can extend beyond destruction of the facilities themselves to business interruption, data loss and supply chain disruption.
These emerging fire risks are therefore no longer merely a matter of facility maintenance and repair, but a factor that can also create business and industrial risks. This is why identifying risk factors in advance and reducing the likelihood of incidents have become important.
Risks at existing vulnerable facilities also persist. In older homes, traditional markets and small workplaces, aging infrastructure and inadequate safety equipment mean that a small fire can cause extensive damage. A lack of equipment to detect smoke early or extinguish a fire quickly also increases the likelihood of casualties.
According to the Korea Fire Protection Association, nationwide property damage from fires in detached homes rose steadily from 40,295,320,000 won in 2023 to 42,652,150,000 won in 2024 and 48,612,810,000 won in 2025. Deaths and injuries also increased over this period, from 504 to 542 and then 567.
Although the factors behind the outbreak and spread of fires differ by facility, a common issue is that on-site management by human experts alone has physical limitations. Industry and insurance companies propose artificial intelligence (AI) and data technologies as an alternative. Under this approach, sensors, video and facility operating data are used to detect abnormalities continuously, while experts verify the findings and respond.
An official at the Korea Fire Protection Association emphasized: "For AI safety technology to be applied at industrial sites, a mutually reinforcing management system will need to connect not only technology development but also performance verification, certification, on-site application, risk data accumulation and insurance integration."
Insurance must also move beyond compensation to risk management
Technical standards for emerging risks also need to be developed in parallel. Electric vehicles, ESS and data centers have different risk characteristics, limiting the effectiveness of existing uniform safety management approaches. Risk factors need to be analyzed in detail through testing and research, and areas not covered by legislation need to be supplemented by specialist technical standards, such as the Korea Fire Protection Association's fire safety standards (KFS).
There are also calls for insurance to shift its emphasis from compensation after accidents to comprehensive risk management. This would involve using insurers' accumulated accident and loss data for risk assessment and reducing the likelihood of accidents through safety inspections and preventive activities. When an accident occurs, prompt loss assessment and insurance payments should help affected facilities and businesses return to normal quickly.
However, this transition has not yet been sufficiently achieved. For example, the disaster liability insurance that logistics warehouses are required to carry covers only liability to third parties, not damage to the warehouse itself. Of the 1,455,800,000,000 won in total property damage from fires at warehouse facilities nationwide during the recent five-year period, from 2021 through June 2026, general and logistics warehouses accounted for a substantial 92.1%. Data centers are not even subject to compulsory insurance. Because few people work on site, they are not included in any insurance framework, including that under the Fire Insurance Act.
Coverage is needed not only for vulnerable facilities but also for vulnerable groups. Households whose financial circumstances make it difficult to buy insurance or install additional safety equipment can lose both their homes and their livelihoods in a fire.
The Korea Fire Protection Association and the Gyeonggi Fire and Disaster Headquarters have introduced Home Fire Peace of Mind Insurance for recipients of basic livelihood assistance and people in the next-lowest income bracket. Eligible people are enrolled automatically without a separate application. Coverage includes up to 30 million won for damage to residential buildings, up to 7 million won for household contents, up to 100 million won for fire-related liability for property damage and up to 2 million won for temporary accommodation.
An insurance industry representative said: "The core of fire safety policy is to connect prevention and diagnosis, technology, insurance and damage recovery within a single system. This means applying tailored preventive measures to aging facilities and establishing new technical standards for facilities in emerging industries, while also linking continuous AI-based management with risk sharing through insurance."
Original Korean article: Financial News
English brief by Korea Wind Intelligence, koreawindintel.com
