Thailand’s property and casualty (P&C) insurers are expected to face elevated claims following the 7.7-magnitude earthquake that struck Myanmar earlier this year.
The seismic activity caused structural damage to buildings in and around Bangkok – approximately 600 miles from the epicenter – including the collapse of a construction site. However, global and regional reinsurers are likely to absorb the majority of the insured losses, according to S&P Global Ratings.
The Thai insurance sector has taken steps to bolster its resilience to natural disasters since the severe 2011 floods. Many companies have increased their reinsurance coverage, particularly for catastrophe events. S&P stated that these enhancements are expected to limit the financial impact of the Myanmar earthquake on local insurers.
S&P estimates insurance losses for Thai P/C insurers to range between THB20 billion and THB30 billion (US$600 million–US$900 million).
The event is comparatively smaller than other major insured loss events in the country, including the 2022 COVID-19 lump-sum payouts of around THB150 billion (US$4.5 billion) and the 2011 floods, which led to claims totaling THB500 billion (US$15 billion).
The claims from the recent earthquake are expected to be manageable for Thai insurers, S&P said, due in part to the excess-of-loss reinsurance policies commonly held by insurers, particularly those rated by the agency. These arrangements allow reinsurers to shoulder significant portions of the losses.
Sub-limits in insurance policies will also help contain exposures; for instance, standard home fire policies typically include earthquake coverage of up to THB20,000 (US$586) annually, as reported by the Thailand General Insurance Association.
Insurance penetration in Thailand remains relatively low at approximately 1.6%, with limited uptake of earthquake-specific coverage. Earthquake risks are usually bundled into broader natural catastrophe policies, reflecting the low perceived threat of such events in the region.
Meanwhile, Thailand's reinsurance sector, particularly Thai Reinsurance Public Company Limited (THRE), experienced significant financial growth and faced notable challenges in recent years.
THRE reported a net profit of THB57 million in the first quarter of 2024, marking a 418% increase compared to the same period in the previous year. This surge was attributed to improved reinsurance results and a significant reduction in provisions for doubtful debts related to COVID-19-affected accounts.
S&P expects further adjustments in the insurance landscape following the earthquake. Local insurers and reinsurers are likely to work together to expand and clarify coverage for seismic events. This may include more defined policy terms and broader earthquake protections in response to shifting risk perceptions.
As reinsurers bear the majority of the current losses, premium rates are likely to increase. S&P notes that rising reinsurance costs could pressure the profit margins of Thai P/C insurers in the coming years, unless offset by growth in policy volumes or improvements in risk selection.
Ongoing developments are also anticipated in risk modeling. Enhancements may focus on incorporating Bangkok’s soft soil conditions and the interactions between low-frequency seismic waves and building characteristics. S&P said greater model precision could improve both underwriting accuracy and the insurance sector’s ability to prepare for future disasters.
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