S&P Sees Thai Insurance Industry Growing ‘Despite Challenges’

Standard & Poor’s Ratings Services has issued a report – “Thailand Insurance Outlook 2007-2008” – as part of a series of articles on the country’s insurance industry. S&P concludes that “Thailand’s insurance industry shows considerable promise for life and non-life players despite the challenges and competition expected.”

There are two other articles in the series: “Thai Life Insurers Embark On A Long, Rocky Path To Growth” and “Regulatory Shakeup Should Spur Consolidation Among Thailand’s Non-Life Insurers.”

The Thai life sector presents “low penetration rates” that “offer solid longer-term growth prospects for the players in the sector,” said S&P. “Tax incentives, GDP growth, and the rising attraction of insurance products with savings elements following a drop in interest rates earlier this year,” should boost performance indicated S&P credit analyst Paul Clarkson.

In the non-life, (P/C) sector, S&P noted Thailand’s “stable underwriting performance,” but it also indicated that the “risks stemming from medium-term challenges are moderately high.” It is a fragmented sector with divergent financial strengths, rudimentary risk management, and unsophisticated technical expertise. “The investment environment is also restrictive,” Clarkson added.

“Much depends on how far the regulator is committed to liberalizing the market and enhancing insurer’s financial strengths over the longer term,” he continued. Thailand’s Department of Insurance plans to introduce “a risk-based capital regime, which is being adopted in other Asian countries.” This may cause difficulties for some Thai non-life insurers due to their marginal solvency status,” and could further polarize the financial strength in the sector.

“There are positives resonating through both insurance sectors and, even if that spells a long and rocky path to growth, the result is better financial conditions and risk management, which can only help in policyholder protection,” Clarkson concluded.

The report is available to subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor’s credit ratings, research, and risk analysis, at: www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-9823 or sending an e-mail to: research_request@standardandpoors.com. Ratings information can also be found on Standard & Poor’s public Web site at: www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search.