OIC to consult on Asean disaster insurance scheme

Late this year, Thailand will host a meeting of Asean insurance regulators to discuss cooperation to deal with the threat of natural catastrophes, Pravej Ongartsittigul, secretary-general of the Office of the Insurance Commission of Thailand, said yesterday.
He made the comment at a news conference after signing a memorandum of understanding with Kim Seok-dong, chairman of South Korean’s Financial Services Commission, to promote international regulatory cooperation.
Kim also expressed support for regional or global cooperation as a way to prepare for the impact of climate changes that often trigger natural catastrophes.
Thailand and other countries last year suffered from severe flooding, mudslides and fierce storms. The devastating floods in the Kingdom led to the creation of a natural-catastrophe insurance scheme by the government with a capital base of Bt50 billion.
Pravej said some countries in Southeast Asia did not have the capacity to set up such a fund because of limited financial resources, so a regional arrangement might be needed.
He said the insurance fund was necessary as more private investment is expected to come to Asean after the 10-member bloc agreed to create a regional economic community by 2015. These investors will need insurance to hedge against risks from natural disasters.
In the few months since implementation of the |government’s insurance scheme, there have been |about 4,000 buyers with a combined insured amount |of Bt700 million; 80 per cent of them are households, |he said.
Each household pays a premium of 0.5 per cent per year of insured amount, and they will get maximum |compensation of Bt100,000 if their houses are damaged by severe flooding, fierce storms or earthquakes.
“Households in less risky areas could choose to buy insurance protection of Bt20,000 and they would pay premiums of only Bt100 per annum, which is very cheap,” Pravej said.
Companies are apparently still buying coverage from private insurers because they offer greater protection. “Many insurance firms have charged the same rates as our premiums,” he said.
The government insurance scheme has brought down the market premium rate from a peak of two digits during the height of flooding last year, he said.
However, the market rate in high-risk areas such as Ayutthaya and Pathum Thani provinces remains high, at about 3-5 per cent, compared with 1-3 per cent in lower-risk areas, he said.
“The market [rates] will drop further if the government’s flood-prevention measures such as dams and drainage systems are effective,” Pravej said.
He said the state-run insurance scheme planned to buy reinsurance worth Bt20 billion from foreign insurers after premiums drop further. Reinsurance is needed as the fund wants to minimise its risk from paying high claims to policyholders.
The cost of insured property damages from floods |last year was Bt480 billion. Of this, the household insured amount was between Bt10 billion and Bt20 |billion.
So far claims paid by private insurers have been worth about Bt200 billion, said Pravej, acknowledging a delay in pay-outs.
He said most households had received compensation and all of them would be paid by the end of July. However, only 75 per cent of companies will have received compensation by the end of next month.