2017 was yet another challenging year for the engineering insurance market in Korea as the domestic construction industry remained in recession. The market continued to decline, with premium income falling by 6.2 percent to KRW 267.0 billion in 2017 compared to the previous year. This downward trend, combined with market softening, adversely affected our domestic engineering business, reducing our gross written premiums to KRW 147.4 billion in 2017 compared to KRW 153.2 billion in 2016.
Meanwhile, the domestic engineering insurance market continued to have favorable loss experiences, with a loss ratio of 44 percent, in the absence of natural catastrophes and large-loss events. Likewise, our domestic engineering business delivered solid underwriting results.
Going forward, it looks inevitable that the domestic engineering insurance market will contract further as the lack of funding continues to become a major downside factor. The Korean government cut its 2018 budget for infrastructure construction by 14.2 percent to KRW 19 trillion, and its infrastructure spending is expected to keep shrinking by 2019. In response, we will make our utmost efforts to drive growth by actively exploring new business opportunities. Developing customized products for target clients will be an important task for us as we seek to further solidify our leadership position in the market.
On the international front, we achieved a strong growth in engineering insurance premiums despite a decrease in premiums involving Korean contractors’ overseas construction projects and overall rate softening in the global engineering insurance market. Our gross written premiums from the overseas engineering business rose by 12.1 percent, backed by our robust business growth in London and countries like China and those in Southeast Asia. In 2017, Korea’s international construction orders recovered by 2.9 percent compared to a record low level in 2016, and the construction industry expects the trend of recovery to continue into 2018 amid a steady rise in international oil prices. Supported by this favorable prospect, we will strive to achieve our growth target this year by strengthening our current business relationships with major clients and expanding into new markets.