Sustained growth uncertain in nonlife sector
The growth in nonlife insurance direct premiums in Thailand has picked up in recent quarters, but the prospects that this will be sustained are uncertain, Fitch Ratings says.
Persistently slow economic growth in Thailand may constrain public and private consumption, and in turn lower appetite for insurance products, while the government’s approval for construction of large projects or a recent proposal to allow health insurance to be tax deductible could result in higher future premium volumes.
Profitability in the motor segment, which is Thailand’s largest nonlife insurance segment, has steadily narrowed due to more intense market competition and higher claim expenses. Fitch believes smaller nonlife insurance companies will be more vulnerable to losses, especially as the motor segment moves towards detariffication. Fitch expects Thai nonlife insurers to maintain their robust capital levels. The sector’s average capital adequacy ratio for 2012-2016 has been well above the regulatory minimum. At the same time, the topfive insurers have kept their riskbased capital ratio over 200 per cent.
