Disaster compensation could pass 30%

Compensation for catastrophic events – severe floods, storms and earthquakes – could later be increased from the proposed 30 per cent of the insured amount to 50 per cent, the chairman of the state-owned insurance fund for natural-disaster coverage said yesterday.

Payungsak Chartsuthipol said he expected the Cabinet would today consider premium rates proposed by the fund’s committee. 

The committee has proposed premiums for households set at 0.5 per cent of the insured amount, with compensation limited to Bt100,000. 

Premiums from small and medium-sized enterprises would be collected at 1 per cent, and large firms at 1.25 per cent of the insured amount under the panel’s proposals. 

Compensation for SMEs would be limited to 30 per cent of the insured amount, with a cap of Bt50 million per business. 

Compensation for large businesses would be subject to the same 30-per-cent limit, but with no cap on the insured amount. 

“We will later ask the government to increase compensation for firms to 50 per cent of the insured amount, and the premiums would also be higher,” said Payungsak, who is also chairman of the Federation of Thai Industries. He said he would advise households to buy both catastrophe and less severe flood protection, so that they can be compensated when their homes are damaged by flooding below disaster level.

“I’m afraid that people could be confused, thinking that catastrophe coverage also includes less severe flooding, which is not the case,” he added. 

Under the proposed coverage, catastrophic events or natural disasters must be declared as such by the government, with overall damages exceeding Bt5 billion and at least two damaged parties demanding compensation. 

The magnitude of an earthquake must be at least 7 and wind speeds must be at least 120km/h for the insurance to kick in. 

Payungsak said the committee would also propose to the government the expenditure plans of the fund, which could need to spend about Bt500 million during its initial operation. 

Once the Cabinet approves the insurance premium rates, the panel will sign a memorandum of understanding with 66 local insurers, with the sale of coverage taking place the same day.

The committee will also strike a deal with foreign insurers to reinsure the risks taken on by the fund, he said. 

Payungsak expects about 1.3 million households will join the scheme. 

Homes with minor flood damage would be compensated to the tune of Bt30,000, while those under 50-75 centimetres of water would receive Bt50,000. Homes under 76cm to 1 metre of water would get compensation of Bt75,000, while those under deeper flood water would get a maximum of Bt100,000. 

The government has set up an insurance fund worth Bt50 billion with the aim of restoring public and investor confidence after last year’s unprecedented floods. 

It also aims to bring down the premium rate for flood coverage, as the market rate has increased sharply as a result of the disaster.

While some foreign investors are unsure whether the funding is adequate, Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong has sought to reassure all concerned that as the government plans to invest in flood-prevention measures, the risks of a repetition of last year’s disaster are not high. 

In a separate matter, the Transport Ministry will propose for Cabinet’s consideration today a plan to use Bt31 billion for 75 projects to raise road levels in flood-prone areas as a preventive measure. 

The funding would come from the government’s post-flood investment budget of Bt350 billion.

Raising the levels of these roads would allow them act as dykes. The projects are targeted for completion by September. The Marine, Highways, and Rural Roads departments will be responsible for them.