Disaster forces Thaisri to change business plan, raise premiums
The worst flooding in 50 years has prompted Thaisri Insurance to revise its business plan in terms of premiums and risk management not only to curb losses but also to persuade its reinsurance partners to continue taking risks in Thailand.
The company is considering a new strategy for next year to ensure growth amid rising risks, particularly from natural disasters. This year’s flood crisis has spawned many important changes in the industry, including higher premiums, stringent conditions from reinsurers, and revised home-insurance policies.
The company will still try to achieve double-digit growth next year. Before the severe flooding, it was aiming at 18 per cent next year. The flood has also prompted the company to scale down its growth target for this year to 14 per cent to Bt1.9 billion from its previous projection of Bt2 billion.
The company is one of the local insurers managing many affected global accounts including Padaeng Industry, The Thai Dairy Industry, Saha Pattana Pibul, McKey Food Services (Thailand), Nestle (Thai) and Diageo Moet Hennessy (Thailand). Estimated gross losses of the company from the flood crisis are forecast at between Bt7 billion and Bt10 billion. Of the total, losses from global corporations account for 70 per cent and retail policyholders for the rest.
Chief executive officer Natee Panichewa said yesterday that the damages would not hit the company much thanks to strong financial backing from its partners, including Zurich Financial Services and Munich Re Group. They are all top financial institutions and reinsurers.
However, Thaisri Insurance will rush the design of product and management plans to facilitate operations and ensure growth next year.
Theera Bunnag, executive vice president, said the company had very little risk exposure, as the flood losses will be mostly handled by reinsurers. The company has purchased excess-of-loss reinsurance – double the risk – so that customers will enjoy fast pay-outs. The company will continue to purchase excess-of-loss reinsurance to ensure settlement of claims next year.
"The flood has prompted the company to set up a working team to raise rates and devise a strategy to facilitate business in the future and to match circumstances that changed among reinsurers," he said.
The flood crisis is a turning point for the insurance industry in Thailand. Now there is a different gap in the price range and risk coverage and a rise of 20-200 per cent in prices depending on exposure.
Thaisri plans to balance its portfolio by focusing more on retail and niche customers rather than big corporations. Of the company’s total premiums, vehicle insurance accounts for 70 per cent, corporate insurance for 25 per cent and non-motor for the rest. Conditions for home insurance policies will be adjusted focusing on the deductible.
The company’s main concern for losses this time is business interruption, as it will create a domino effect on supply chains not only in Thailand but also overseas.
"Some insurance companies will be phased out of the industry as they may not want to continue to operate amid high risk, and premiums will be increased in line with increasing risks," Theera said.
