Disaster-risk insurance expected to boost premium growth by 16%

The Cabinet on Tuesday approved the proposal of the Disaster Insurance Promotion Fund Committee, which will manage the Bt50-billion catastrophe fund, to set premium rates of between 0.5 and 1.25 per cent for natural-disaster insurance for households and businesses.
OIC secretary-general Pravej Ong-artsithikul said that the agency earlier expected premiums this year to expand by nearly 14 per cent to Bt534.08 billion, of which non-life insurance would be Bt156.57 billion and life insurance Bt377.50 billion.
Premiums of non-life insurance could increase to Bt170 billion as natural insurance can be quickly sold, he said.
The fund committee will today name the fund manager, which will be an insurance company. After that the committee will sign a memorandum of understanding with 66 insurers and will start selling insurance next week.
Pravej is also a committee member of the Disaster Insurance Promotion Fund.
He said that of the Bt50-billion fund, Bt30 billion would be reserved for paying compensation claims and Bt20 billion as reinsurance for reinsurers overseas.
Thai Reinsurance has a great opportunity to be chosen by OIC as fund manager.
The sum insured for reinsurance will not be more than Bt300 billion.
Households and businesses are expected to buy the natural-disaster insurance as the premium rates have been set. New premiums of Bt10 billion to Bt20 billion annually would support the fund management and attract reinsurers to Thailand.
The government’s flood-management plan will help ensure the country is able to prevent such natural disasters and reinsurance premiums will gradually decrease, he said.
When reinsurance is back to normal, the Bt50-billion fund could be transformed into micro-insurance, which the OIC is promoting among households who prefer paying a small premium for insurance of Bt30,000-Bt40,000.
“We want to encourage Thai people to access insurance, and the micro-insurance model can help boost insurance penetration,” he said.
According to the natural-disaster premium rates, households will buy 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 30 per cent of sum insured. The premium for large companies would be 1.25 per cent for coverage of no more than 30 per cent of sum insured.
Insurance companies would have retention of 1 per cent of sum insured of no more than Bt300 million and 99 per cent would be sent to the fund. In case the sum insured is more than Bt300 million, insurers would have retention of 0.5 per cent.
Households are not required to paying deductibles unlike businesses that have to pay deductible of 5 per cent of sub-limit condition.
Both households and businesses must have mortgage insurance, including fire insurance, before buying natural-disaster insurance, which will cover floods, major storms and earthquakes. Households and businesses in flood-prone areas will not be protected by the fund because the government will be taking caring of the compensation.