Thai Officials Hope To Sell Water-Management Plan To Foreign Insurers

[webfact]

FLOOD INSURANCE

Officials hope to sell water-management plan to foreign insurers

Wichit Chaitrong

The Nation

The Finance Ministry is planning discussions with foreign insurers, whose growing reluctance to participate in flood-damage reinsurance could rock foreign investors' confidence in Thailand. Meanwhile, the Bank of Thailand has been asked to bear the cost of exchange-rate risk for yen-denominated loans to support investors.

"Foreign insurers have stopped taking in flood reinsurance, as they lack confidence in Thailand's water-management system," Finance Minister Thirachai Phuvanatnaranubala said yesterday. "This is crucial. No matter how much the government is doing in rehabilitating industrial estates, investors need all-risks insurance or they could relocate their investment."

Finance permanent secretary Areepong Bhoocha-oom has been assigned to lead a delegation to meet foreign insurers, when the government's water-management plan will be unveiled in a bid to win back their confidence. In a recent discussion, Singaporean insurers suggested the need for an effective water-management plan.

Areepong will visit Japan first, and then head to London to meet insurers, Thirachai said.

According to the Finance Ministry, factories in seven inundated industrial estates are insured for a combined Bt600 billion. Some of them have filed flood-damage claims worth Bt200 billion, 60 per cent of which is reinsured by Japanese insurance companies.

Individuals have insured their properties to the tune of about Bt200 billion, Areepong said.

Thirachai said the government planned to invest an initial Bt15 billion to rehabilitate flood-hit industrial estates.

He also said farmers in the Central region might have to grow only two rice crops a year, so that their land could be turned over to reservoirs during the rainy season. They would be compensated by the government if this change were to be implemented.

Meanwhile, more dams should be built, preferably within a year, the minister said.

"It's a must that the government unveils the water-management plan as soon as possible," he added.

Meanwhile, Areepong said he believed the government could manage things, as everyone knows where the water comes from and where it will go. It is predictable, unlike tsunamis or earthquakes, he said.

Thirachai did not agree with Deputy Prime Minister Kittiratt Na-Ranong, who said the government might act as insurer if private insurance firms did not provide flood coverage. "The key is how [quickly] private insurers can resume their services," he said.

The finance minister also asked the Bank of Thailand to bear the cost of exchange risk, about 3 per cent annually, for yen-denominated loans from the Japan Bank for International Cooperation.

The JBIC has promised to offer soft loans worth Bt50 billion to Japanese firms and joint-venture projects between Japanese and Thai investors that have been hit hard by the flooding.

The loans will be allocated via local banks that have business with the affected manufacturers.

Thirachai said BOT Governor Prasarn Trairatvorakul was unsure whether the law allowed the central bank to do so. Prasarn has promised to look into the matter, he said after the two met yesterday.

The cost to the central bank of shouldering the exchange-rate risk would be about Bt1.5 billion annually over at least three years.

"The central bank may bear some of the cost and the rest should be shouldered by firms, or firms may pay back such cost when they can stand on their own feet," Thirachai said.

The government has negotiated with commercial and state-run banks for their cooperation to lend about Bt300 billion to support flood victims.

It is expected to come up with details of rehabilitation projects soon, he added.

-- The Nation 2011-11-03

[cloudhopper]

"Foreign insurers have stopped taking in flood reinsurance, as they lack confidence in Thailand's water-management system,"

Now how could they have reached that conclusion?

[Moruya]

I can't see there being a particularly long queue to that store

[pimay11]

"Meanwhile, Areepong said he believed the government could manage things, as everyone knows where the water comes from and where it will go. It is predictable, unlike tsunamis or earthquakes", he said.

I wonder if Areepong would consider informing FROC of what "everyone knows". The only thing that is predictable is the government trying to save face and their minions making stupid statements like this!

[mrtoad]

and so we start another day, with the usual idiotic statements from The Government.

[ResX]

"Foreign insurers have stopped taking in flood reinsurance, as they lack confidence in Thailand's water-management system,"

Now how could they have reached that conclusion?

There are at least 4 dams that are capable of absorbing the flood waters safely in Thailand. Instead of absorbing the flood waters all these dams due to the reason best understood by water authorities had "donated" theirs to the downstream. Almost all of those flood waters were passed to the down stream.

See what those main flood control dams did and not done a few months before this catastrophic event. You may also reach to the same conclusion as those foreign insurers.

Note: When the sluice gates for major flood control dams are opened, we are no longer talking about the flood risk. The flood must occur. Only the flood intensity and the effected areas that might differ. In Thailand, as I could learn over the last few weeks, flood control is about to have a strategy to keep those sluice gates closed during the monsoon. Performing cloud seeding prior to the coming of monsoon, for instance does not go well with this strategy. Having the dams almost full before the monsoon is over also does not go well with the strategy. Keeping those sluice gates closed during the monsoon is the key result area to save Thailand from similar or event bigger flood in the future.

Edited November 3, 2011 by ResX

[OzMick]

"Meanwhile, more dams should be built, preferably within a year, the minister said."

Hmmm, well there are dams and there are dams, but anything significant is going to take a dam-sight longer than a year. Should that be "dam-site"?

[Thaddeus]

and so we start another day, with the usual idiotic statements from The Government.

It's like putting on your most comfortable pair of shoes. Actually, it's like someone putting them on for you and then bringing you nice hot cup of tea.

[Thaddeus]

"Meanwhile, more dams should be built, preferably within a year, the minister said."

Hmmm, well there are dams and there are dams, but anything significant is going to take a dam-sight longer than a year. Should that be "dam-site"?

More dams also has the potential for more mismanagement, they could put BKK underwater twice as fast next time.

[slipperx]

FLOOD INSURANCE

The Nation

The Finance Ministry is planning discussions with foreign insurers, whose growing reluctance to participate in flood-damage reinsurance could rock foreign investors' confidence in Thailand. Meanwhile, the Bank of Thailand has been asked to bear the cost of exchange-rate risk for yen-denominated loans to support investors.

"Foreign insurers have stopped taking in flood reinsurance, as they lack confidence in Thailand's water-management system," Finance Minister Thirachai Phuvanatnaranubala said yesterday. "This is crucial. No matter how much the government is doing in rehabilitating industrial estates, investors need all-risks insurance or they could relocate their investment."

Yeah well like that was unexpected. Why insure where your risk is determined by a succession of governments with the intellectual capacity of a budgerigar. Insurers will need to assess their risk very carefully to account also for the interference by the rich and selfish people of low intelligence who wield power here. Even when a guy with some nonce (Abhisit) gets into office all he can do is nothing because he has to kow tow to the rich and powerful rather than help the country get to its feet and actually help the people who live here. Mismanagement, no maintenance and man made enhancement to every natural disaster is the result.

.....According to the Finance Ministry, factories in seven inundated industrial estates are insured for a combined Bt600 billion. Some of them have filed flood-damage claims worth Bt200 billion, 60 per cent of which is reinsured by Japanese insurance companies.

No wonder the Yen is in trouble!

Thirachai said the government planned to invest an initial Bt15 billion to rehabilitate flood-hit industrial estates.

And all this money the government is going to spend is going to come from where exactly. Most businesses avoid VAT and most people pay no tax and those that do do everything to avoid it.

He also said farmers in the Central region might have to grow only two rice crops a year, so that their land could be turned over to reservoirs during the rainy season. They would be compensated by the government if this change were to be implemented.

Great idea - and the price and supply of rice? Where is the money for compensation going to come from and more importantly where will it go - to the farmer or to some chinese-thai intermediary to filch?

Meanwhile, more dams should be built, preferably within a year, the minister said.

Yeah right! Let's build a dam it will only take a year! He would be optimistic if he said five years using a whole heap of foreign help or maybe 10 if using only Thai craftsmen and engineers - 10 years to build, five years to fail maybe? Or is he talking about a few million sandbags maybe?

"It's a must that the government unveils the water-management plan as soon as possible," he added.

Does that mean they have a water management plan that they should 'unveil' or does it mean they need to make a new one?

Meanwhile, Areepong said he believed the government could manage things, as everyone knows where the water comes from and where it will go. It is predictable, unlike tsunamis or earthquakes, he said.

Yes water comes from the sky and goes to the sea - everyone knows that because they teach it at school (least I think they might!). As to being predictable - nonsense - just like tsunamis and earthquakes who knows the amount of rainfall next year or where it will fall? All you can do is plan for the worst you might expect over a long time period like maybe 150 years, knowing even that is a guess from past records over the last 150 years if Thailand has records for that long which I doubt - and then having the intelligence to understand that even those predictions may be exceeded with climate change so ensuring you have a plan in place for when things don't go according to plan. Of course 'everyone knows' Thais excel in planning ahead!!!!

Thirachai did not agree with Deputy Prime Minister Kittiratt Na-Ranong, who said the government might act as insurer if private insurance firms did not provide flood coverage. "The key is how [quickly] private insurers can resume their services," he said.

Hmm The foreign reinsurers who have been in business for decades with extremely advanced prediction models and who are still sometimes wrong and who will no longer insure Thailand because it is incapable of managing the country responsibly, can just be replaced by the government who will for sure pay out when the next disaster comes along caused by its own incompetence and the money comes from where? Get the money from the people, cream off as much as is possible, deny everything and distribute aid as if the members of the government are paying for it themselves and then give back a little when the $%^& hits the fan. Great idea - not!

The finance minister also asked the Bank of Thailand to bear the cost of exchange risk, about 3 per cent annually, for yen-denominated loans from the Japan Bank for International Cooperation.

And if the Bank of Thailand cannot because the estimated exchange risk is exceeded - then what? Where does the money come from again?

The JBIC has promised to offer soft loans worth Bt50 billion to Japanese firms and joint-venture projects between Japanese and Thai investors that have been hit hard by the flooding.

The loans will be allocated via local banks that have business with the affected manufacturersThirachai said BOT Governor Prasarn Trairatvorakul was unsure whether the law allowed the central bank to do so. Prasarn has promised to look into the matter, he said after the two met yesterday.

The cost to the central bank of shouldering the exchange-rate risk would be about Bt1.5 billion annually over at least three years."The central bank may bear some of the cost and the rest should be shouldered by firms, or firms may pay back such cost when they can stand on their own feet," Thirachai said

So now it is clear what will happen when the government takes on the insurance risk - effectively the companies pay it back when the government doesn't pay out after collecting the premium and get a load of money from abroad, make the BOT take on the exchange risk and make the companies pay the money back if and when they actually start making a profit again.

Come and Invest in Thailand!!! I think foreign businesses might have pause for thought.

The government has negotiated with commercial and state-run banks for their cooperation to lend about Bt300 billion to support flood victims. It is expected to come up with details of rehabilitation projects soon, he added.

Edited November 3, 2011 by slipperx

[KeyserSoze01]

"Foreign insurers have stopped taking in flood reinsurance, as they lack confidence in Thailand's water-management system," Finance Minister Thirachai Phuvanatnaranubala said yesterday. "This is crucial. No matter how much the government is doing in rehabilitating industrial estates, investors need all-risks insurance or they could relocate their investment."

It's rather obvious that their only real concern is to preserve foreign investments.

Given the current situation and level of mismanagement demonstrated by the powers that be, I doubt anyone will be underwriting Thai flood insurance, unless it's the Thai government itself..

Thailand may have adequate infrastructure to manage a crisis of this nature, but a fool with a tool is still a fool.

[cloudhopper]

and so we start another day, with the usual idiotic statements from The Government.

[DGS1244]

"Foreign insurers have stopped taking in flood reinsurance, as they lack confidence in Thailand's water-management system," Finance Minister Thirachai Phuvanatnaranubala said yesterday. "This is crucial. No matter how much the government is doing in rehabilitating industrial estates, investors need all-risks insurance or they could relocate their investment."

It is the foreign Re-insurers who are getting jumpy, I doubt if there is a single Thai Insurer who has sufficient funds to meet their obligations and very very few of them re-insure on the international market. Only the large multinationals will have adequate cover and eventually the losses will be come from the Likes of Swiss re, Zurich Re, Munich Re, Allianze Re unless you are an Japanese Owned company and their cover will come from almost certain a 'Captive' back in Japan. If the local Thai thinks he will get paid, if he is insured that is, by his 'local' provider he is in for a big shock. It will have to come from the government and we all know what will happen to the monies then.

[Arkady]

This is quite humorous. Thai officials, many of whom got their jobs as rewards for helping an escaped convict, are going to come up with some hastily bolted together flood prevention plan that will probably never be implemented to persuade foreign insurers. Get real. Insurance companies work on actuarial probabilities, not paper assurances from corrupt third world politicians, who will be gone in a year. Now they have new data to punch into their models. The Thai government will have to put its money where its mouth is and offer the insurance itself or go back to being a rice exporter.

[madmitch]

There are going to be some interesting argument on this one if and when the claims hit the reinsurance market.

For catastrophe reinsurance: How many losses? How many days did the catastrophe last? Most catastrophe reinsurances carry an hours clause, stating that losses must occur within a certain time period and anything outside this period will either not be covered or will be deemed a separate loss. Was the event a natural catastrophe or man-made?

Facultative reinsurance should in most cases follow the original claim payment which will raise its own questions. Flood is not always covered as a peril.

The only people making any money out of this will be loss adjuster and lawyers.

And as for future coverage? The Thai market will possibly be ordered by the Government to include flood up to a certain level then set up a fund to cover any losses above this. This may affect available reinsurance coverage outside of Thailand.

I don't have any idea what the potential loss may be. Have any figure been estimated? The Japanese captives and reinsurers will be looking at a larger business interruption claim than the actual physical property damage.

All in all the amount will probably be significantly less than a major US hurricane or California earthquake, for example, but will be pretty large for the Thai market.

[Hyponeros]

Typical Thai speach: When it comes to pay then foreigners are welcomed otherwise, get the hell out of here!

Nothing new in Thailand!

[SABloke]

"Meanwhile, Areepong said he believed the government could manage things, as everyone knows where the water comes from and where it will go. It is predictable, unlike tsunamis or earthquakes", he said.

I wonder if Areepong would consider informing FROC of what "everyone knows". The only thing that is predictable is the government trying to save face and their minions making stupid statements like this!

Hear hear! So "predictable" that PM has always blamed "unpredicable" factors - "less water than expected", "more water than expected", "Bangkok safe", "Bangkok not safe". I think we all have the right idea: Stop reading the news and wait for flood information from friends, colleagues and our own eyes.

[pepi2005]

Typical Thai speach: When it comes to pay then foreigners are welcomed otherwise, get the hell out of here!

to keep it fair - this also applies in other countries, certainly also your own I'd guess.

However, it seems that slowly, the bad image Thailand has got amongst Western tourists over the last years (scams, ripoffs, double pricing, unclarified deaths, corruption on every level etc. etc.) has made its way up to the decision-making levels of managements and governments. They seem to be increasingly aware that many Thais are not fair players and only seek their own advantage, not fair partnerships.

So it's true - Karma hits back.

It is time for Thailand to grow up, to get rid of the weak and ugly spots of their otherwise great culture and to behave in a way that makes others more confident in establishing long-term patnerships with them again. Keeping promises (like to establish water management that is fit for this part of the world and its climate) is just one of them.

Edited November 3, 2011 by pepi2005

[JohnAllan]

Insurers insure. Reinsurers reinsure. In other words, insurers use reinsurers to offset much of the risk, but that means the government has to convince both entities of its ability to implement effective flood management systems, not just one. And, of course, different insurers often use the same reinsurance firm.

And since Areepong has made it abundantly clear that everyone knows where the water comes from and where it will go; that, unlike tsunamis and earthquakes, it is predictable; that begs the question: just what did the authorities NOT understand about the floods' predictability? You may be sure the insurers and reinsurers will be asking just that . . .