Thailand Quake Spurs Insurance Shake-Up: Coverage Changes Loom

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The insurance industry in Thailand is facing significant changes following a powerful earthquake that struck much of the country, including Bangkok, last Friday. In light of increasing natural disaster risks, the Thai General Insurance Association (TGIA) has announced that free earthquake coverage will no longer be standard. Earthquake insurance will be separated from traditional fire insurance policies, marking a shift in how these risks are managed.

Somporn Suebthawilkul, TGIA president, highlighted the unprecedented nature of Friday's quake, which has prompted insurers to reevaluate their strategies. Previously, disaster coverages like earthquakes and floods were bundled with fire insurance for buildings and homes. However, with the severity of such events becoming more apparent, insurers are moving towards standalone earthquake policies, raising disaster premiums, and adjusting deductibles to better align with the heightened risks.

This could mean policyholders might face higher deductible rates—potentially increasing from 20% to 30% for structural insurance on high-rise buildings. Moreover, insurers are expected to apply a more rigorous risk assessment approach, considering factors like construction company credentials for new projects and building usage for existing structures.

A recent casualty of the quake was the under-construction Office of the Auditor General's building. The project was insured under a Contractor All Risk (CAR) policy valued at 2.24 billion baht, shared among four insurance firms, including Dhipaya Insurance and Bangkok Insurance. These companies, boasting strong financial standings, are prepared to manage the claims, partly due to regular stress tests and reinsurance arrangements with global partners.

As climate change threatens to make such disasters more frequent, Mr Somporn emphasises the importance of preparedness across all sectors. Insurance remains a critical tool in mitigating the financial strain caused by natural disasters. By collaborating on large-scale coverage with other insurers and reinsurers, companies can better distribute risk and protect their financial stability, reported Bangkok Post.