Insurers prepare for more global disasters

The insurance industry is facing the consequences of growing geopolitical conflicts as well as natural disasters, prompting insurers to prepare for greater business risks, according to participants at the 23rd conference of the Association of Insurers and Reinsurers of Developing Countries (AIRDC).
Somporn Suebthawilkul, president of the Thai General Insurance Association (TGIA), said natural disasters and geopolitics are the main risks that insurance businesses around the world must pay attention to, and that would require a higher level of risk to manage.
“Natural disasters are becoming more severe and occurring all over the world, causing catastrophic damages which are difficult to prevent,” he told the conference, which was held in Bangkok for the first time.
“At the same time, the risk of war is increasing, pushing insurance companies to be more careful about potential impacts to their businesses. For customers or companies facing higher risks, partly caused to their shipments through high-risk areas, insurers might have to increase insurance premiums or avoid insuring them,” he added.
Chai Sophonpanich, vice-president of AIRDC and chairman of Bangkok Insurance Plc (BKI), said this year’s theme is creating opportunity amid challenges and turmoil, reflecting that the current global insurance landscape is faced with economic uncertainty, technological changes, climate risks and shifting regulations.
Comprising insurance companies, reinsurance companies and other insurance groups, the AIRDC conference is held to strengthen insurance markets in developing countries and enhance cooperation within the insurance industry across regions.
The participants will also provide guidance and inspire ideas for creating growth opportunities in both the life and non-life insurance sectors.
This year the domestic insurance business is expected to grow by only 3%, due partly to the impact of severe floods.
“The insurance business’s growth has expanded by less than 10% over the past decade due to high competition, making it harder to make a profit. In 2024, insurance companies will generally have less profit from investments than in 2023 because Thai businesses are growing more slowly,” Mr Chai acknowledged.
In the next 2-3 months, insurance business profits will be even worse if interest rates are cut, while the Stock Exchange of Thailand index has not increased much. Besides, the baht has strengthened, affecting exports, including SMEs in the supply chain, potentially causing economic growth to decelerate, he added.
BKI’s chief executive Apisit Anantanatarat said the floods this year would cause less damage to the insurance business than those of 2011 because factory areas had not been affected.
This year, damage caused to insurance firms by floods in the northern provinces, especially Chiang Rai and Chiang Mai, has not been significant because most were small outlets which do not have insurance coverage.
The floods in the South caused damage to many areas, including Phuket, Krabi and Samui, where many hotels and resorts are located. BKI is currently collecting data regarding the damage.
“Natural disaster damage is likely to increase as Thailand will face a total of nine storms,” said Mr Apisit.
Auto insurance business is still expanding by about 4% this year, making the overall insurance business grow by 3-4% compared to 2023, he added.