Thailand's insurance sector looks set to shake off any lingering concerns following the recent period of political instability. A number of insurers recently reported strong growth in premiums and earnings for the first six months of 2010, a trend that is expected to continue into 2011.
Speaking at a conference on the Thai life insurance sector, Sara Lamsam, chairman of the Federation of Thai Insurance Organisations, said that insurers had shrugged off the effects of riots that struck Bangkok in May.
"The industry was barely affected by the political violence, growing robustly in the first half of the year by 15%," he told the conference. "We expect the industry will manage to surpass 18% growth by year-end, as the second half is normally the peak season."
These projections are in line with recent results posted by individual companies. On August 20, Bangkok Insurance (BKI) announced that it had achieved a 15-year high in net earnings for the first six months of the year. Earnings amounted to $27.6m, an increase of almost 80% compared to this same period in 2009. BKI also reported that written premiums rose by 18.5% to $160m, with net underwriting profit up by 64.4% to $15m.
According to Panus Thiravanitkul, BKI's president, the outlook is as good or better for the remainder of the year.
"Our target growth of 13% is well achievable, as the global and Thai economies are recovering, exports are growing, banks are lending more, car sales are improving and the government's stimulus spending is under way," Panus told local media.
Another policy writer, MSIG Insurance (MSIG), announced on August 18 that its earned profits amounted to $2.2m during the first seven months of 2010. The company also reported that it expects earned premiums to increase this year by at least 17% to $80bn. MSIG said in a statement that its strong performance was in part due to the recovery of the economy and a more selective approach to the underwriting of car insurance.
One factor that could slow Thailand's economic recovery, and have a direct impact on the country's insurance sector, would be a re-igniting of the political tensions that flared during the first half of the year.
Parts of downtown Bangkok were heavily damaged, resulting in substantial claims filed with insurance firms. This in turn is likely to affect the bottom line of a number of leading policy writers. However, the strong overall growth predicted for the sector means that the exposed insurers should be able to cover any losses.
In a statement issued in late May, BKI said it expected to incur losses of around $250,000 as a result of the political unrest, a figure the company said would not affect its financial status or operations.
Indeed, according to some experts, the Bangkok protests could even be good for the insurance industry. These incidents increase awareness of the need for coverage against acts of terrorism, loss of trade and rioting.
Chotiphat Bijananda, managing director of Southeast Life Insurance, said that local insurers generally did not include terrorism or riot damage coverage in their general policies. However, he expected this to change as demand for broader coverage increases among businesses.
"Many, if not most, companies in Thailand don't have this kind of coverage. No one ever thought that it was needed," he said in an interview with the Bangkok Post in late June. "We saw a number of small shops, such as 7-Eleven convenience stores, robbed or fire-bombed. Bank branches, office buildings were all hit. They all are now showing greater interest in buying insurance."