Insurers to face credit scrutiny

Insurers to face credit scrutiny.

The Commerce Ministry's Insurance Department will require all Thai insurance companies - both life and non-life - to submit to credit ratings.

The move is line with the department's plan to lift the operations of Thai insurers to international standards.

Director-general Chantra Purnariksha said that from mid-year, international credit-rating organisations would be hired to examine the country's 24 life insurers and 75 non-life insurers. Multinational insurers whose parent companies are already rated will also be required to submit to the credit-rating process.

"Some companies operate as branches; some have joint ventures with local companies; others take over existing companies. The factors [relevant to] each insurer are different from their parent companies, so all will be required to submit to ratings," Chantra said.

At present, only two life-insurance companies in Thailand have credit ratings. Thai Life Insurance, the country's second-largest life-insurance company, was assigned a BBB+ rating by Standard and Poor's in 2003. Last year, its rating was lifted to A-.

Muang Thai Life Assurance, the country's fifth-ranking life insurer, has a BBB+ rating from Standard and Poor's. What the department will do with firms that fail to score good ratings has not been revealed.

In 2005, the department ordered cash-strapped Commercial Insurance to shut down, and about 10 other insurance firms have been fined or summoned to discuss their financial status or business practices. Some were in violation of regulations, while others were in cash trouble, and their reserves failed to meet departmental requirements.

Chantra said the credit-rating requirement would be implemented along with the department's master plan, which is aimed at maintaining surveillance of insurance companies for the protection of policyholders.

At the same time, the department intends to adopt an aggressive marketing plan, in order to create insurance awareness within the Thai community. Among other things, this is aimed at compelling insurers to create quality retirement-plan products.

"Total insurance premiums account for only 4.6 per cent of the country's gross domestic consumption," Chantra said. "Following the economy-of-scale method, the more people that buy insurance, the lower the premiums will be. So, we'll conduct more aggressive marketing to boost awareness.

Petchanet Pratruangkrai,

Piyarat Setthasiriphaiboon

The Nation
Thursday January 11, 2007