Thailand flood loss manageable: Fitch

 In a statement released by its office in Singapore, the rating company said that though the current flooding in Thailand is unusually severe and economically costly, the insured losses are likely to be at a manageable level and will not trigger widespread solvency problems, or undue financial strain, for the country’s non-life insurance players.
 The Bank of Thailand has so far estimated the cost of the damage at about Bt120 billion.
 Due to the ongoing nature of the floods, it will take some time for international catastrophe modelling firms and local loss adjusters to accurately estimate insured losses. Many lines of insurance will be affected, including industrial all risk, property, motor, business interruption and to a lesser extent, life insurance. Many factories, and car manufacturers in the affected areas have ceased production, and the ultimate insured loss will be partly predicated on the speed with which businesses resume operations.
 "Fitch’s initial assessment at this juncture is that the insured loss will be markedly lower than the economic losses, although the extent of impact will vary from company to company," the rating company said.
 Thailand, with a population size of close to 70 million, is relatively under insurance-penetrated compared to more established markets. Based on Swiss Re Sigma estimates, its total insurance penetration rate (measured by amount of premiums as percentage of GDP) amounted to 4.3 per cent in 2010, versus 8 per cent for the United States and 12.4 per cent for the United Kingdom. Fitch believes that a sizeable proportion of the population residing in the rural north and north-eastern provinces affected by the floods have generally little insurance protection.
 Per losses to factories in seven inundated industrial estates, estimated at Bt140 billion by the Office of Insurance Commission, Fitch said that Japanese non-life insurers registered in Thailand appear be more affected by the flooding than local insurers given the high exposure to industrial all risk and business disruption coverage for Japanese manufacturers in the affected industrial estates.
 The OIC estimates that about 80 per cent of the Bt140 billion losses are covered by the Japanese insurers with total sum insured of Bt456 billion. To Fitch, this remains modest at about 5 per cent of the total sum insured for industry all risk type. "While the damage could be on a much larger scale once the full assessment has been completed, Fitch believes Japanese insurers are unlikely to be significant affected, given 85 per cent of the coverage is being ceded to foreign reinsurers."
 Based on OIC statistics, Japanese insurers that may be affected include the MS&AD Insurance Group, which has exposure through two subsidiaries - MSIG Insurance and AIOI Bangkok Insurance - and the MSI branch, with a total sum insured of Bt2.8 billion for industrial all risks (34 per cent market share) at end-July 2011. Two other Japanese non-life insurers that also have some exposure are Sompo Japanese Insurance, an affiliate of NKSJ, and Tokio Marine Sri Muang, an affiliate of Tokio Marine Holding, together adding in total Bt3.6 billion (8.4 per cent share). However, including all types of risks, Japanese insurers have a moderate exposure of 19 per cent share in Thailand’s non-life insurance market.