Improved coverage: Reforms are laying a stronger foundation for expansion

In 2011 as unprecedented damages from floods hit the non-life segment, Thailand’s insurance industry caught the world’s attention. But while loss ratios for property surged, the industry’s claim settlements continued to function efficiently and provided a crucial source of financing for post-crisis reconstruction.

The spotlight shone on the non-life segment’s fragmented structure, while the risk-based capital (RBC) regulatory framework will help raise overall underwriting capacity and spur some consolidation. Unscathed by such large claims pay-outs, the more profitable life segment will continue to draw intense competition among large foreign-linked and local underwriters. And while 2011 was a cathartic year for the industry as a whole, government efforts to normalise reinsurance spreads will allow the fundamental driving force for growth to re-assert itself (see analysis).

STIMULUS: Although dynamic by regional standards, the sector still lags behind its potential. According to the regulator, the Office of the Insurance Commission (OIC), insurance density (total insurance premiums to population) stood at a modest $199 in 2011, while insurance penetration (total premiums to GDP) reached 4.3%. Compared to world averages of $267 and 11%, respectively, there is clearly room for growth. Life insurance penetration has driven the sector for the past decade, reaching 2.6% in 2011, while non-life penetration stands at 1.7%. The insurance regulator aims to expand coverage to 6% by 2014, a key element of the four-year Insurance Development Plan passed in September 2010, by fostering rapid growth in micro-insurance and improving the industry’s solvency.

An expected stimulus from post-flood reconstruction in 2012 will add to the growth already stemming from an expanding urban middle class, rising provincial incomes and a shift away from bank deposits towards alternative products such as life insurance. Credit rating agency Fitch expects double-digit year-on-year ( yu-y) growth in 2012 on the back of the post-flood rebound, new products and sustained tax incentives.

A CROWDED MARKET: The property and casualty (P&C) market remains smaller and more fragmented than the life segment. There were 71 general insurance underwriters in 2011, 67 of which specialise in P&C, while 24 companies compete in life according to the OIC. But while the top five life insurers control a combined share of around 70% of the $9.5bn life market, the top five underwriters in P&C control only 40% of the $2.8bn market. Some 40 underwriters control market share of less than 1% in P&C.

Yet smaller insurers have remained profitable in this market, protected by regulated product pricing ( Thailand is one of the few remaining tariff markets). Many underwriters are part of larger conglomerates – either banks or industrial firms – creating captive markets of referrals from affiliated companies. Thai Reinsurance (ThaiRe) estimated that some 50% to 60% of non-life companies are family-controlled, obstructing mergers and acquisitions (M&A) in the sector.

In addition to reinsurance, ThaiRe provides back office support for many of these smaller underwriters, creating a certain effective consolidation in their operations. “ThaiRe is instrumental in providing support, particularly for smaller underwriters who act in effect like brokers, retaining very little of the risk they cover,” Surachai Sirivallop, the director and CEO of ThaiRe, said.

In such a fragmented state, the non-life segment in particular is plagued by low efficiency, although the picture is mitigated by tariffs. Expense ratios for underwriters often vary between smaller and larger firms, with a gap of up to 20%. Low efficiency and at times low solvency have been compensated by tariffs on auto and fire products ensuring operational profits. Some larger underwriters are focusing on improving their operational efficiency to prepare for any liberalisation of the non-life industry’s tariff structure. As long as tariffs are maintained, the consolidation theoretically required may be hindered despite the regulatory shift to RBC.

FOREIGN DIRECT INVESTMENT: Many global insurers are present on the Thai market, particularly in life, and several foreign players have taken stakes in Thai insurers in recent years. The OIC has stopped awarding new licences and no longer permits the establishment of foreign branches, although it has approved the entry of new foreign players into existing underwriters.

FOREIGN OWNERSHIP LIMIT: The cap on foreign ownership in the insurance sector stands at 25%, although special permission can be given by the OIC for ownership of up to 49%, and from the Ministry of Finance for anything above. Yet a five-year grace period granted in 2008 will expire by February 2013, when all existing stakes above the limit are to be reduced to 25%. Although successive governments have pledged to gradually raise ceilings on foreign ownership to 100%, no timeline has yet been announced. While full liberalisation of services industries should take place by 2015 under the ASEAN Economic Community, the ceilings on foreign ownership of insurance firms remain restrictive.

The picture is clouded by the fact that certain foreign insurers control higher stakes by spreading ownership of shares through nominees and shell entities. Racing against the clock, the OIC is pushing for an amendment of the rules, allowing more discretion for the Finance Ministry in foreign ownership restrictions. “The law is rigid, saying that if the shareholder is a juristic company, that company’s shares must be owned by a Thai national,” Pravej Ongartsittigul, OIC’s secretary-general, told OBG. “If the juristic company is Thai-registered, that should be enough. We are working with the government to try to take the rest out.”

Foreign firms play a more important role in life than in general. Over half of life insurers are linked to or controlled by foreign players, but this falls to a quarter for non-life. Five foreign firms hold branches in Thailand, although they account for only 7% of the non-life market according to OIC statistics. In life, meanwhile, six of the top 10 insurers are linked to foreign players, who view Thailand as presenting healthy profit opportunities over the longer term. But as competition between many global players is already tight on the Thai market, barriers to entry onto the market for any new player may prove challenging. “It is difficult to see how a foreign underwriter not already present in Thailand could gain profitable market access,” Mike Plaxton, the CEO of Krungthai-AXA Life Insurance, said. “They would need at least 3% to 5% market share just to break even." Consolidation is thus likely to take the form of a new foreign entrant buying a stake in an established underwriter, or of M&A among existing underwriters.

AWAITING CONSOLIDATION: Notwithstanding the regulated nature of the market, the sector has seen some M&A in the past year and could see more in the aftermath of the floods. The life segment has seen the most movement. Siam Commercial Bank bought New York Life’s 47.33% stake in their life joint venture and turned it into its full subsidiary SCB Life in 2011 for BT8.4bn ($268m). Other foreign-linked banks have been divesting themselves from stakes in life insurers, setting up distribution agreements with the purchased underwriters. In March 2012 Thanachart Bank, partly owned by Canada’s Bank of Nova Scotia, sought to sell its two insurance subsidiaries selling life, health, fire, auto, marine and transport coverage. The bank had inherited Siam City Life Assurance in its acquisition of Siam City Bank in 2010 in addition to its existing two subsidiaries. The life subsidiary, the 10th largest on the market with a 2.17% share, generated premiums of BT7.1bn ($226.5m) and assets of BT34.9bn ($1.1bn) in 2011. The non-life subsidiary, the eighth largest with 3.32% of the market, had premiums of BT4.6bn ($146.7m) and assets of BT8.7bn ($277.5m).

The sale is expected to generate some $500m for the Canadian-linked bank, with both Japanese underwriters and Thailand’s Southeast Insurance rumoured to be interested. One obstacle that Thanachart says has forced it to weigh its options is the tax implication of M&A, a concern confirmed by other insurers.

With RBC already implemented and all companies expected to comply with International Financial Reporting Standards requirements by 2013, an unresolved issue remains how reserves due to be released with the shift will be taxed. “One of the key challenges for M&A on the Thai insurance market is the tax issue,” Rowan D’Arcy, the president and CEO of Sri Ayudhya Capital, told OBG. “Authorities should regularise the situation to allow for the M&A that is theoretically necessary.” The regulator said it is working with the Revenue Department to resolve this issue in 2012.

The general segment has seen its own share of sales. In March 2012 HSBC sold its non-life insurance business and concluded bancassurance deals with France’s AXA and the UK’s QBE. Sri Ayudhya General Insurance, a Bank of Ayudhya (Krungsri) affiliate in which Allianz holds a 16.8% stake, acquired BT Insurance in 2010 for BT392m ($12.5m) and became an investment holding company, Sri Ayudhya Capital, in 2011.

Despite the tariff structure for many product lines, the impact of the floods and requirements for recapitalisation may spur further consolidation. Increased competition, especially on auto and fire lines, may affect profitability for smaller underwriters in the medium term. Yet some observers doubt the viability of any new market entry. “It is difficult to see how any new market entrant could gain market share without aggressive rate cutting, which would neither be healthy nor profitable over the longer term,” Nusara Banyatpiyaphod, the president of Ocean Life Insurance, told OBG.

Consolidation may also be aided by the implementation of the RBC framework for capital requirements. Given the relatively short maturity of financial instruments on the Thai capital markets, the industry has been negatively affected by a significant mismatch between assets and liabilities, particularly for longer-maturity policies such as life insurance. In a bid to narrow the gap, the regulator shifted from the Solvency 2 model to RBC in September 2011, segmenting capital requirements according to risk. “Risk-based capital measures will certainly strengthen industry fundamentals,” Somporn Suebthawilkul, the managing director of Dhipaya Insurance, told OBG. “However, the higher operating costs must ultimately be passed onto the consumer. This should become evident in the next 2-3 years.”

NEW REQUIREMENTS: Following stress tests over the past two years, underwriters were required to file RBC-compliant returns to the OIC by January 2012, but this deadline was extended to February due to the floods. The framework requires underwriters to maintain capital adequacy ratios of 125% in 2012, due to rise to 140% in 2013. Though the sector’s overall ratios are healthy, these requirements could push small firms to recapitalise or raise rates. Life underwriters have faced fewer challenges than small non-life companies in adapting to the new requirements: a September 2011 test by the OIC found that average capital adequacy ratios in the life segment were above 300%, given healthy capitalisation and low leverage levels. As higher reinsurance rates hit the market in 2012 in the aftermath of floods, pressure on smaller underwriters has increased.

Staffing has emerged as a challenge in the industry’s shift to RBC. While life insurers will have no problem in finding the required actuarial expertise given the foreign links of many underwriters, many smaller non-life underwriters may have difficulty complying with the OIC’s rule of having 70% of underwriters staffed by fellow-level actuaries by 2014. The national reinsurer has thus emerged as a key support mechanism for smaller underwriters, offering services such as actuarial consultants and risk adjustors to those with limited capacity. The smaller (non-life) insurers, particularly those whose back-office operations are supported by ThaiRe, are expected to cede more risk to reinsurers rather than increase their capital.

REINSURANCE: The industry’s retention rate was already low before the floods. Although compulsory cession of 5% to ThaiRe (half of whose clients are also shareholders in the national reinsurer) has been phased out, non-life underwriters are encouraged to cede this amount voluntarily – and most do. With equity of BT2bn ($63.8m), the national reinsurer has covered property, casualty, marine, engineering and life risk since its establishment in 1979. An inter-governmental reinsurer, Asian Reinsurance Corporation (AsianRe), is also active on the market but only covers a negligible share of the market. Much of the risk is thus ceded through international treaties given the limited capacity of many smaller underwriters. While non-auto policies remain profitable, low retention levels reveal that local underwriters have yet to maximise the value of their existing business. Much of the comprehensive property risk coverage, which included virtually free flood coverage before late 2011, was ceded internationally.

As the floods hit, a number of global reinsurers either drastically reduced their exposure, like MunichRe or SwissRe, or exited the market entirely, such as France’s state-owned Caisse Centrale de Réassurance, which controlled a 10% share of the Thai reinsurance market after 10 years of expansion. The low reinsurance rates caused by intense competition for the large amount of ceded risk were shattered by the ballooning residential and industrial claims stemming from the floods.

Non-life premiums have increased by between two and 10 times depending on the type of risk. Canada’s Fairfax Financial Holdings acquired a 25% stake in ThaiRe for $70m in February 2012, boosting the reinsurer’s solvency. Already active in the non-life market through its local joint venture with Falcon Insurance, Fairfax is one of many new entrants to the reinsurance market, alongside renowned players such as Berkshire Hathaway.

The floods revealed the local insurance industry’s effective claims payments mechanisms, which provided necessary post-flood funding. Given that non-auto business is often linked to firms in the same insurance group, claims are usually processed efficiently.

NON-LIFE: The non-life segment has long been one of the most important and dynamic of the region. Gross written premiums have averaged a third higher than Singapore’s in the past several years, for instance. While P&C was affected by the 2009 slowdown linked to the financial crisis, it had rebounded rapidly in 2010 only to be severely affected by the floods of late 2011. SwissRe forecasts longer-term growth rates of 4.6% on average for the non-life segment over the next decade.

As many underwriters’ financial outlook deteriorated significantly in 2011, the prospects for future growth are still bright, particularly for auto and fire coverage. Yet while Japanese insurers were the most affected by flood-related claims, the three Japanese underwriters account for only 19% of the market. While higher reinsurance rates are expected to work their way into higher local premiums in 2012, government intervention to normalise rates by establishing a natural catastrophe fund should shield local insurers somewhat.

MOTOR: Insurers have continued to flock to the motor segment. According to figures from the General Insurance Association (GIA), motor remains the largest segment of the non-life market, accounting for roughly 60% of total premiums. The largest motor underwriter is Vhiriyah Insurance, controlling 24.05% of the market in 2011. The remainder of the market remains highly fragmented, with Synmunkong Insurance in the second position with 7.45% market share, Bangkok Insurance with 5.19%, LMG Insurance with 5.18%, the Safety Insurance with 5.16% and Thanachart Insurance with 4.66%. ThaiRe estimates that only half of vehicles on Thai roads hold compulsory insurance. Should enforcement levels rise, compulsory motor coverage should rise from the 20% of total motor premiums it accounts for and drive growth in this segment.

The sporadic use of deductibles (the amount paid after an accident before insurance coverage starts) has also kept motor premiums high according to the GIA. While deductibles are used in over 10% of cases in neighbouring Malaysia and Singapore, they are almost never applied in Thailand due to reluctance from both underwriters and the insured. The association expects the application of deductibles could reduce premiums by between 5% and 20%. The industry is also working with the OIC and British motor insurer Thatcham, which runs a research centre in Thailand, to clarify, refine and revise motor risk ratings, which should reduce premiums and drive further penetration. “Over the next three to five years we expect premiums will drop by 1-2% a year,” Dennis Means, the managing director of Thatcham Thailand, told the local press in March 2012.

MARINE & TRANSPORT: The marine and transport segment is crucial to the Thai economy, reliant as it is on exports, but only makes up 3.39% of the total non-life market. Dominated by Japanese underwriters, this segment remains fragmented, although less so than fire insurance. The five major marine underwriters in 2011 were Tokio Marine Sri Muang, with 12.32% market share; Mitsui Sumitomo, with 11.58%; Bangkok Insurance, with 8.04%; MSIG Insurance, with 7.45%; and Dhipaya, with 5.82%. Growth in marine insurance accelerated since 2003, although it remains linked to volatile export markets. Given the recent growth in intra-Asian shipping and the dominance of Japanese investors in Thailand’s industrial export sector, Japanese underwriters are expected to maintain their hold on this segment.

FIRE SEGMENT: Although more profitable than other forms of coverage, the fire segment has declined since the start of the past decade, given the widespread shift from basic fire coverage to comprehensive insurance, which includes property, flood and other policies. The fire segment accounted for 5.82% of the non-life market in 2011, although this rises to 9.9% if fire protection elements of comprehensive policies are included. Aggressive rate cutting in comprehensive coverage up until the 2011 floods was possible because comprehensive lines are categorised as “miscellaneous” and are therefore not subject to as strict tariff regulation.

Also fragmented, the fire segment is dominated by several Thai firms. Bangkok Insurance held 12.74% market share in 2011, followed by Dhipaya, with 12.01%; Muang Thai Insurance, with 10.77%; Siam Commercial Samaggi, with 7.05%; Southeast Insurance, with 6.94%; and New Hampshire (a division of AIG’s P&C underwriter Chartis, the largest travel insurer in Thailand), with 5.8%. The association estimates the lion’s share of fire premiums is for commercial building.

But while the personal fire lines are estimated to account for only 15% of premiums, this proportion could rise as underwriters move away from comprehensive coverage and the property market receives a boost from the government’s various incentives for first-time home buyers. “The affordable housing plans of the government will certainly drive insurance premium growth as 80-90% of houses under BT5m ($159,500) being sold will be financed through mortgages, linked to insurance policies,” Kheedhej Anansiriprapha, the CEO of AXA Insurance, told OBG.

OTHER POLICIES: The miscellaneous category of non-life insurance, which includes comprehensive policies as well as health and personal accident (PA), grew rapidly since 2000 to reach 31.28% of the market. PA and health have typically been viewed as add-ons or sweeteners for clients, rather than profitable products in and of themselves. Despite the reticence of underwriters to bundle types of coverage into comprehensive policies following the floods, the miscellaneous segment as a whole is expected to sustain its growth on the back of higher government spending on infrastructure and a return to comprehensive policies in the medium term. Former state-owned insurer Dhipaya held a commanding 22.24% share of this segment in 2011, followed by competitors such as Bangkok Insurance, with 9.99%; ACE INA, with 5.63%; Muang Thai Insurance, with 4.79%; and Mitsui Sumitomo, with 3.98% of the market.

Overcoming the shock related to unprecedented floods in 2011, the non-life sector still holds strong potential for growth. Stricter enforcement of compulsory insurance and a refined segmentation of tariffs will boost the motor segment. Government policies to support homebuyers, agricultural prices and the purchasing power of Thais will help spread growth nationwide. “The insurance sector usually grows 1.5 times faster than GDP,” AXA Insurance’s Kheedhej said. “We expect growth in the provinces beyond Bangkok in particular, since these have rapidly grown to contribute around a third of our premium in recent years.”

MICRO-INSURANCE: The regulator is promoting micro-insurance in a bid to expand coverage. One of the key elements in the 2010 Insurance Development Plan to increase penetration to 6% by 2014 is to foster above 20% annual growth rates in micro-insurance. The World Bank estimates that the potential market for such micro-products would only cover the lowest quintile of the population – those earning an average of $1632 a year, compared to the lowest three quintiles in a poorer country such as Indonesia.

The priority is to control costs, particularly for distribution, and to keep wording and coverage for such policies simple. “The crucial factor for micro-insurance products is to make them simple and low cost in order to cater to class-C clients,” Ocean Life Insurance’s Nusara told OBG. The products vary from motor and property to specific life policies. Ocean Life has recorded solid growth in industrial life policies for lower wage earners in north and north-eastern Thailand, for instance.

Various ideas have been circulated regarding the optimal distribution channel for microinsurance. The OIC has issued a new licence for “micro-agents”, although the low earning potential of such a position have hindered the uptake. Other life insurers have announced plans to sell scratch cards for basic coverage through convenience stores such as 7-Eleven.

Life insurer Ayudhya Allianz CP (AACP) has floated the idea of working through aggregators – pools of brokers or municipal and associative organisations – to roll out micro-insurance. Previous attempts to provide coverage for motorcycle taxi unions in 2006 met excessively high loss ratios, a lesson for such future ventures. However, there is still clear scope for this segment of products to grow. One group with particular potential is the 1.2m former loan-shark clients who were transferred to a government micro-credit scheme under the previous Democrat administration.

Micro-insurance remains at the frontier of the insurance market and underwriters will need to remain vigilant in controlling costs but innovative in their product offerings. While risky, strong encouragement by the regulator will move the industry to provide more access to those with the lowest disposable income.

LIFE: From a more solid financial base and relatively unscathed by the impact of floods, the life segment remains the driver of growth for the sector as a whole. Registering 10% y-o-y growth in 2011 according to the OIC, the life segment saw a drop in sales in flood-affected areas only during the three months of flooding. The low penetration of life insurance minimised the sector’s exposure to life insurance claims from the floods, even though slow growth in the fourth quarter of 2011 brought annual growth down from 15% in 2010 to 10% a year later, half lower than originally forecast.

While most of the biggest global life insurers are present on the Thai market (aside from Sun Life Financial), their volume of business varies widely and they compete with a number of strong Thai-owned underwriters. Prudential and Manulife, for example, held only very small shares of the market in 2011. New York Life exited the market in 2011 by selling its stake to Siam Commercial Bank, which took full control of the former joint venture. The most profitable foreign ventures are those with local banks – AXA’s life insurance venture with government-controlled Krung Thai Bank accounted for 10% of the bank’s bottom line in 2011, for example. Leading Thai groups also present strong competition for foreign underwriters. Muang Thai Life is banking on 20% growth y-o-y for 2012, while Thai Life is expecting a surge of 40% based on the diversification of its distribution strategy (see analysis).

INVESTMENT: Underwriters’ investment has declined in the past two decades, although it remains a more important source of revenue for life insurers than for non-life. Operational profit has been sustained by the industry’s tariff structure in non-life. Life insurers, however, have relied on investment income to supplement operational profits, but have faced an important asset-to-liability mismatch (ALM) given the relatively short maturity of financial instruments on the Thai market. As a whole, average investment income has declined from 11% in the 1990s to 5.6% in the first decade of the 21st century. The focus of investment has shifted more towards fixed income and equities since the Asian financial crisis, with some 80% of assets invested in fixed income instruments and property, and 10% in equities.

The non-life segment has a higher exposure to equities than its regional peers, particularly given that underwriters with equity links to a larger conglomerate will typically hold sometimes under-performing stock in their affiliated companies. Lower returns are often seen as acceptable given the volume of referral business from the sister companies. While lower returns from bond investments have contributed to the attractiveness of guaranteed life insurance products, they also have the potential to squeeze life insurers’ profits over coming years. “If interest rates stay low there will be pressure on life insurers’ profitability, while the introduction of the RBC framework puts more pressure on underwriters to control their ALM,” Chon Sophonpanich, the president of Bangkok Life Assurance, said.

The OIC was working with the central bank in early 2012 to allow for some investment by insurers in foreign instruments, to help resolve the significant ALM, particularly for underwriters in the life industry. The resulting limited outflow of funds could help offset the rise in the Thai baht, an acceptable by-product of this limited liberalisation in the view of the government.

DISTRIBUTION CHANNELS: The consensus among underwriters, particularly in life, is that growth over the longer term will rely on a multi-channel distribution strategy. Banks had long maintained equity stakes in underwriters, but they have sought to actively leverage synergies between the two groups since being allowed to sell insurance through their branches.

Revenue from bancassurance grew sharply since banks were initially allowed to sell insurance products in 2003, when they initially accounted for some 0.1% of total premiums (only about BT30m, $957,000). Premiums have since grown fast, tripling from 15% to 47% of the total value of new premiums between 2007 and 2009 alone according to SwissRe. The leading banks have registered particularly strong growth through their distribution tie-ups with affiliated underwriters. Siam Commercial Bank sells products from SC Samaggi and SCB Life, and KasikornBank distributes products from Muang Thai and Muang Thai Life, for instance. While some banks do not have exclusive bancassurance links and sell for a number of different underwriters, the best performances were from those in exclusive deals. Muang Thai Life, for instance, collected 60% of its new premiums from bancassurance channels in 2011. Credit rating agency Fitch expects bancassurance to drive new premiums in the coming years.

AGENTS: Thailand’s agency force of more than half a million, the traditional channel for product roll out, saw a concurrent drop in its share from 80% to 44%. Licensed by the regulator, agents may represent as many underwriters as desired but in practice usually only represent two. Given the strict tariff structure for many non-life policies imposed by the OIC, competition centres on quality and speed of service, driven by commissions to agents and brokers. Although these commissions are themselves regulated by the OIC, with a ceiling of 12% for agents selling auto for instance, underwriters are able to offer commissions of up to 35% by categorising payments as miscellaneous costs.

While agents have covered both corporate and retail markets, brokers have traditionally targeted the corporate segment and continue to play a key role. Brokers have lost some of their traditional market in motor to bancassurance but retain strong links on auto sales from dealerships directly linked to car producers. But with some 400 broker firms registered on the market, capacity and standards vary.

Some larger local brokers such as TQM run their own outbound call centres staffed by employees. In practice, however, the brokers’ market remains quite centralised among larger foreign players, including AON (which commands 60% of the non-life brokers market), Marsh and Jardine Lloyd Thompson, a joint venture of Hong Kong’s Jardine Matheson and Lloyd’s of London, as well as many larger local brokers like TQM. Many of the smaller brokers on the market are affiliated with conglomerates of sister companies, who offer a captive market. Moving forward brokers will likely continue to play a key role in covering the biggest risks and large infrastructure projects.

SALES CENTRES: Underwriters have also seen some growth in telemarketing, but for specific product lines that reach an early break-even point. Underwriters including AACP and AIA have built sizeable call centres and saw the best results from credit card call lists transferred by affiliated banks, for products such as PA. Yet renewal rates for telemarketing have remained below the 50% mark, meaning that underwriters must focus on achieving profitability in the first year of coverage.

New regulations introduced in 2010 have reduced the effectiveness of some telemarketing campaigns by introducing strict no-call lists and calling hours, but this channel continues to play a key role. Other benefits have also contributed to its appeal. “Although renewal rates are very low for telemarketing sales, it can still generate useful cash flow as long as you sell policies that can break even the first year, in segments such as PA or hospital cash,” Donald Carden, the president and CEO of Siam Samsung Life Insurance, said. Direct TV sales were also introduced in 2010, with underwriters launching adverts on local TV and running in-bound call centres alongside traditional telemarketing centres.

OUTLOOK: While the floods of 2011 illuminated the non-life segment’s fragmented nature and strong reliance on sometimes unrealistically low reinsurance rates, the industry will likely emerge strengthened by the event. Strong intervention by the government should normalise reinsurance rates for P&C. Meanwhile, longer-term structural reforms by the regulator will create a stronger capital base for the industry to seize growth opportunities. The life segment should continue to benefit from continued demand moving forward, with upcoming ASEAN Economic Community liberalisation making Thailand one of the key battlegrounds for competition in life insurance within South-east Asia.