Thai Reinsurance expects 2012 loss on floods | Clegg Insurance ...

BANGKOK (Reuters)?Thai Reinsurance Public Co. Ltd. expects to post a net loss
for a second year in 2012 as the country?s leading reinsurer is hit by higher
provisions from flooding last year that have pushed up insurance premiums for
natural disasters, a top executive said.

Thai Re had estimated flood-related damage at 10-14 billion Thai baht
($325-455 million), of which about 6 billion was booked last year, Chief
Executive Surachai Sirivallop told Reuters.

?The floods will continue to affect us this year. No one knows the exact
number, but we should make a loss for another year and we should make a profit
next year,? Mr. Surachai said in an interview.

The company reported a net loss of 1.66 billion baht for 2011, the first
since it was founded 33 years ago.

Excluding the flood impact, Mr. Surachai said, the company made a profit of
1.03 billion baht, mainly due to rising premiums from life insurance and rising
fee incomes from insurance services.

He said Thai Re?s net premiums were expected to rise at a double-digit rate
this year, but not as high as last year?s surge of 30% in life insurance
premiums and 45% in non-life insurance.

In December, Standard & Poor?s downgraded Thai Re to reflect its risk
exposure to last year?s floods, which severely affected seven industrial estates
in central Thailand and caused supply disruptions for the global auto and
electronic sectors.

A Thomson Reuters I/B/E/S survey had expected the company to post a net
profit of 676 million baht for 2012.

Some analysts said the company should benefit from higher premium rates and
increased demand for reinsurers because operators need insurance to protect
assets from unexpected events despite rising insurance costs.

The insurance sector was estimated to post a loss of up to 350 billion baht
from flood-related claims, with local insurers hesitant to sell to companies
with operations in flood-hit areas, Mr. Surachai said.

Risk Assessment

Premiums have risen more than two-fold since the floods to levels higher than
in other natural disaster-prone countries such as Japan, where insurers take
into account greater risk from human error, Mr. Surachai said.

?Thailand is seen as a high-risk country after being low-risk for many years,
and risk premiums have jumped more than two-fold. Natural catastrophes may occur
once in 100 years, but human error can happen at any time,? Mr. Surachai said,
referring to criticisms of the government management of last year?s flooding.

Thai Re is in the process of selling a 21% stake to Canada-based Fairfax
Financial Holdings Ltd. for 2.23 billion baht as part of a plan to raise about 7
billion baht from a share offer to boost capital and cover flood-related losses.

?This will be enough to cover flood-related insurance claims and expand our
business,? said Mr. Surachai, an industry veteran and former executive of Hong
Kong-based AIG Reinsurance.

He added that Fairfax, which already owned 4% of Thai Re, would have two
board members but would not have a management role.

Mr. Surachai said he expected to see some consolidation in Thailand?s
insurance sector to maintain competitiveness as the country is due to liberalize
its financial sector in 2015.

?We are not keen to merge with others. We are strong enough to compete in the
domestic market,? he said, adding that some smaller Thai insurers may not
survive given their higher operating costs than foreign rivals.

At the midday trading break, Thai Re shares were down 2.75% after falling
4.4% to two-week low of 3.48 baht. The broad index was 0.9% higher.

Source: http://clegginsurance.com/thai-reinsurance-expects-2012-loss-on-floods

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