Premium rates proposed for disaster insurance

 Committee chairman Payungsak Chartsuthipol, said that for households, the rate would be 0.5 per cent, or Bt500 for a maximum coverage of Bt100,000. The rate for small and medium-sized enterprises would be 1 per cent, for coverage of no more than Bt50 million. The premium for large companies would be 1.25 per cent for unlimited coverage.
The committee also concluded that the coverage would be for natural disasters including floods, storms and earthquakes.
Flood-disaster policyholders can receive compensation claims in cases where the Department of Disaster Prevention and Mitigation issues a warning and if the flood affects assets valued at more than Bt5 billion protected by the Insurance Fund.
However, the level of flooding must be higher than 1 metre for households to make compensation claims subject to a maximum of Bt100,000. The minimum payment is Bt30,000.
He said the proposal on premium rates would be forwarded for Cabinet consideration next week. After that the committee will sign a memorandum of understanding with 66 insurers before it starts selling the insurance. Standard & Poor’s Rat-ings Services said in a statement released yesterday that the government’s Bt50-billion catastrophe-insurance fund could somewhat help absorb the initial loss of insurance companies.
It anticipated that despite the existence of the fund, the reinsurance structure for natural-catastrophe risk would change in Thailand.
S&P noted that flood-affected companies were looking to raise capital or purchase reinsurance to cope with the potential drop in capital.
However, the risk premiums in the Thai insurance industry are considered much lower relative to its catastrophe-risk exposure, especially when compared with other countries. Catastrophe losses from the recent flood were between two and four times the industry’s total premiums, and much higher compared with losses from some key natural disasters in other regions in the past.
Because of low premiums, the Thai insurance industry will take a while to recover lost capital and individual companies may need to raise more capital to remain viable, it said.
The agency recently lowered the ratings on seven subsidiaries of two Japanese insurance groups, MS&AD Insurance Group and NKSJ Group. The “A-” ratings for Dhipaya Insur-ance, Bangkok Insurance and Asia Capital Reinsurance Group are still on CreditWatch with negative implications. Similarly, the “BBB+” rating for Thai Reinsurance is on Credit-Watch with negative implications. Maintaining the negative outlook for the regional industry, it foresees negative rating actions on insurers.