Korea’s leading non-life insurers are teaming up with local administrations to build out the country’s fledgling market for climate-risk insurance, as more frequent heat waves drive up economic losses and protection gaps, according to industry officials Tuesday.

The push comes as prolonged heat waves and tropical nights have become a familiar feature of Korean summers, disrupting outdoor work across construction sites and farms.

Beginning in August, Jeju Island will introduce a program for daily construction laborers that partially compensates them for lost wages when extreme temperatures suspend outdoor work.

Five companies — Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, Hanwha General Insurance, NH NongHyup Property & Casualty Insurance and DB Insurance — are participating in the program.

The initiative is among the few in Korea to adopt parametric insurance, in which payouts are automatically triggered once predefined conditions are met.

If the Korea Meteorological Administration issues a heat wave warning before 1 p.m. and construction sites halt operations for the day, workers will receive compensation for up to four hours of lost wages based on the duration of the shutdown. The benefit is expected to amount to around 17,000 won ($12) an hour.

Gyeonggi Province has operated a similar public-private climate insurance scheme since May last year.

Residents are automatically enrolled without having to apply individually. The policy pays fixed benefits for heat-related illnesses and cold-weather injuries upon diagnosis.

Initially backed by three insurers, the program was renewed in April with the addition of Meritz Fire & Marine Insurance, Hyundai Marine & Fire Insurance and KB Insurance, while also expanding its benefits.

A new payment for severe injuries was introduced and diagnosis benefits for heat- and cold-related illnesses were increased to 150,000 won from 100,000 won.

The public-private model, in which local governments pay the premiums while insurers administer policies and settle claims, is drawing attention as a template that could be adopted by other municipalities seeking to strengthen resilience against climate-related disasters.

“Climate risk is inherently difficult to price because historical data is still limited, making future loss ratios hard to predict. But at the same time, these kinds of programs help insurers accumulate data that will ultimately improve underwriting,” a non-life insurance official said.

The official said the use of parametric payouts can benefit both insurers and policyholders.

“Because payouts are tied to objective, predefined triggers, claims can be processed much more efficiently, requiring less time and manpower while providing clear compensation criteria. That significantly reduces the scope for disputes.”

The industry’s response is also extending beyond government-backed initiatives, with some insurers rolling out products tailored to workers whose livelihoods are exposed to extreme weather.

Earlier this month, NH NongHyup Property & Casualty Insurance launched a comprehensive policy for foreign seasonal workers, who often spend long hours working outdoors during the hottest months of the year.

The product covers employers’ liability for accidents during farm work, as well as business interruption losses when farms are forced to suspend operations after their areas are designated special disaster zones.