Govt insurance scheme aims to protect business
The government will kick off its Bt50-billion flood insurance scheme next week in a bid to help households, businesses and industries manage their flood and other natural disaster risks.
The scheme, which will be implemented by the Office of the Insurance Commission (OIC), is expected to help reduce the cost of insurance coverage following last year’s massive flood disaster.
According to Prawes Ong-artsittikul, secretary-general of the OIC, the government will set aside a budget of Bt30 billion out of the Bt50-billion insurance fund, approved recently, to pay for damage by possible flood and other natural disasters.
Out of the Bt50-billion fund, another Bt20 billion will be used to buy reinsurance contracts from international firms. This will provide estimated additional coverage of up to Bt300 billion.
Last year’s massive floods, especially in Ayutthaya and Pathum Thani provinces, led to huge insurance claims totalling more than Bt700 billion due to the serious damage caused to nearly 1,000 factories inside the seven industrial estates in these two provinces.
Prawes said those who buy natural-disaster and flood insurance contracts sponsored by the government’s fund will also have to buy separate general insurance contracts, while those whose properties are located in floodways and water-retention areas designated by the government are not eligible to buy natural-disaster and flood coverage from the government.
As a result of the huge claims resulting from last year’s floods, many international and Thai insurance firms have been cautious in renewing insurance contracts for this year, or have sought a significant increase in premiums.
To implement the government’s flood and natural-disaster insurance scheme, the OIC has signed a contract with 67 insurance companies in Thailand for the sale of the state-sponsored insurance contracts. Households, small and medium-sized enterprises (SMEs), and large companies may buy these contracts.
According to Cabinet-approved criteria, the insurance premium for households is set at 0.5 per cent for maximum coverage of Bt100,000 per household. For SMEs, the insurance premium is 1 per cent for maximum coverage of Bt50 million, or up to 30 per cent of the total sum insured. For large companies, the premium is 1.25 per cent for maximum coverage of up to 30 per cent of the sum insured.
These insurance premiums cover all areas nationwide, except areas designated as floodways and water-retention areas, whose properties will be compensated by the government separately.
Those who buy flood and natural-disaster insurance from the government-sponsored scheme may seek compensation if the affected areas are declared as natural disaster zones and potential damage is estimated to exceed Bt5 billion. In the event of earthquakes, compensation will be paid when the disaster is 7 on the Ritchter Scale or worse, while in the case of storms, winds must be at least 120 kilometres per hour.
Last year’s massive floods caused estimated damage of Bt1.4 trillion to the economy, on top of the insurance claims of Bt700 billion.
Thai and international insurance firms have demanded that the government take the best possible action to avoid a repeat of the massive inundation, while considering a raise in their insurance premiums to better reflect the potential risk.
Some international re-insurance firms in Europe have also decided to abandon the flood and natural-disaster insurance market due to heavy losses, while others have said they may still renew insurance contracts with existing customers.
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