Thai Re using foreign specialist to estimate damage claims reserve
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Thai Reinsurance (Thai Re) has hired a foreign specialist to estimate its damage-claims reserve for covering potential risk from major future floods in Thailand. The loss-reserve assessment is expected to be completed by the end of the current third quart
The initial claims-reserve projection is for an additional Bt2 billion, which would not require injection of new capital.
Meanwhile, Thaire Life Assurance will be listed on the Stock Exchange of Thailand on October 9. The equity underwriting contract will be signed today.
According to Thai Re’s chief executive officer, Surachai Sirivallop, the major floods in late 2011 significantly affected the insurance sector, with high damage-compensation claims. Thai Re has now hired a foreign specialist to revise the loss-reserve figure to reflect potential risk better. The revised loss-reserve figure, expected to be announced by the fourth quarter at latest, may require an additional provision of Bt2 billion, above the previous loss reserve of Bt9.2 billion. This would not require any capital increase, as Thai Re’s current capital is Bt7 billion.
Surachai said that during the 2011 floods, it was difficult to foresee anything. However, Thai Re will now have Bt9.2 billion plus an additional reserve of Bt2 billion to cover future major floods. The Office of the Insurance Commission has recommended the use of foreign accounting and loss specialists to make an assessment of the potential damages.
If Thai Re cannot secure the opinion of the accountant for its financial statements, which includes damage-claims figures for three years, Thai Re could be delisted from the bourse.
Thai Re has already paid Bt12 billion in flood damage claims, with payments of Bt8 billion (or 40 per cent) still pending; full claims settlement is likely by next year.
Surachai reiterated that this year’s business plan would not focus on growth, while the new business growth target is only 3 per cent. Thai Re will focus on service quality and maintaining the reserve-to-asset ratio at 190-200 per cent, higher than the legal requirement of at least 140 per cent.
Moreover, Thai Re will list Thaire Life Assurance on the SET, with trading of 49 per cent (Thai Re will hold 51 per cent) of the shares set to begin on October 9. This would help Thai Re to reduce the burden in allocating additional loss reserves and secure additional capital. Thaire Life Assurance expects to post Bt1.3 billion in premium income, growth of 20 per cent from Bt1.1 billion last year. The company generated Bt150-million profit in the first half of this year. Hence profit for 2013 is expected to reach Bt300 million.
