The Thai General Insurance Association (TGIA) is moving ahead with plans to create a permanent Natural Catastrophe Fund, targeting the first half of 2026 for its establishment with an initial size of 50 billion baht. Full operational rollout is anticipated in 2027, with the fund intended to play a role in long-term catastrophe risk management for Thailand’s non-life insurance market.
TGIA president Somporn Suebthawilkul said the initiative reflects a shift in Thailand’s catastrophe risk profile, with recent events highlighting the growing scale and frequency of natural disasters, including major floods in Hat Yai and an earthquake in March. “The catastrophe fund will be a permanent mechanism, unlike the temporary fund established after the 2011 floods. Natural disasters are occurring more frequently and with greater severity, making long-term risk preparedness essential for the non-life insurance industry,” he said, as reported by Bangkok Post.
Under the association’s proposal, the fund would be supported by three main sources:
Government participation is expected to take the form of short-term bond issuances with tenors of one to three years. These instruments would be structured so that payouts are linked to the occurrence of qualifying catastrophe events. In the absence of a major event during the term, investors would receive returns in line with market levels, Somporn said.
TGIA has also urged the government to consider additional backstop mechanisms in the event of extreme, low-frequency events that could exceed domestic industry capacity. “The permanent catastrophe fund is critical to maintaining financial stability and confidence in the insurance sector, as Thailand is increasingly classified as a high-risk natural disaster zone,” Somporn said.
A key objective of the proposed fund is to change how the Thai market approaches reinsurance for natural catastrophes. At present, most non-life insurers in Thailand negotiate individually with overseas reinsurers, which TGIA says can dilute collective bargaining power and affect pricing. By aggregating catastrophe exposures and capital within a single fund, the association expects Thai insurers to negotiate from a broader base of risk and capacity. Somporn said this could lead to more efficient reinsurance purchasing and more stable terms over the cycle. The fund would be managed by external asset managers and subject to governance and reporting requirements set by the association and relevant authorities.
The recent flooding in Hat Yai has provided a reference point for the initiative. As of Dec. 15, insured losses from the event stood at 16 billion baht, including 12.5 billion baht in motor claims and 3.51 billion baht in non-motor lines. The scale of those losses has prompted insurers to revisit catastrophe risk structures and capital allocation.
TGIA and its member companies are also investing in catastrophe modelling to refine risk assessment and pricing. This includes more granular, risk-based premium structures for fire and industrial all risks policies, segmented by high-, medium-, and low-risk zones to better align premiums with underlying hazard and exposure. In parallel, the industry is examining the feasibility of a dedicated disaster insurance fund to absorb very large-loss events, as well as initiatives to adjust risk distribution, develop shared market databases, and strengthen common market agreements. More coordinated reinsurance strategies and global risk transfer solutions are also under review to complement domestic capacity. Somporn said these elements form part of a broader framework the industry is developing in response to changing climate and disaster risks.
The move by Thai insurers is unfolding against a regional backdrop in which Asia continues to record the largest gap worldwide between economic and insured catastrophe losses. Recent industry research indicates that Asia’s insurance protection gap for climate-related disasters stands at 82.8%, meaning that only a relatively small share of total losses is insured. Latin America’s protection gap is reported at 81%, while North America’s is lower at 43.2%. A report from MAPFRE Economics, presented at COP30, notes that both the frequency and severity of extreme weather events have been increasing, contributing to higher economic and insured losses over time. According to the report, insured catastrophe losses have been growing at an annual rate of about 5% to 7% since 1992.
