Life insurers say sector is well
Written by changthai11 on Saturday, September 20th, 2008
MARKETS
Life insurers say sector is well
CHAROEN KITTIKANYA
Amid the commotion surrounding American International Assurance (AIA), an affiliate of the embattled US giant AIG, the Thai Life Assurance Association yesterday affirmed that the local industry remains fully intact and is not affected by the US financial crisis.
”As the life assurance business is by nature stringently regulated and the products being offered feature mostly simple protection, be it terms, whole life and endowment, the Thai life insurance industry is as fit as fiddle as it is not affected by the Lehman Brothers exposure,” said association president Sara Lamsam.
At the end of 2007, he said, the industry had total assets of 815.92 billion baht, a rise of 31.5% from a year earlier. Life insurance reserves were 643.51 billion baht, up 31.3%, and capital funds were 114 billion baht, up 38.8%.
Of the total assets, investments in government and state enterprise bonds, debentures and deposits represented 78.25%, and lending, mostly for policy loans and mortgages, was 8.17%.
Investments in equities amounted to 10.86%, mostly in stocks of companies with sound fundamentals, notably in banking and telecommunications, and dividend stocks.
Offshore investments represented only 2.86% of the industry’s investment assets.
Mr Sara said offshore investments required regulatory approval from the Office of the Insurance Commission (OIC) on a case-by-case basis based on the long-term financial strength of each firm.
Apart from policy reserves fully allocated for each policy an insurance company has written, the Life Insurance Act also requires them to set aside at least 2% of reserves as capital fund as a financial buffer.
Capital funds are a portion of assets in excess of the insurer’s liabilities, in accordance with the appraised value of both.
The Act calls for life insurers’ capital funds to be at least 2% of all reserves but not lower than 50 million baht.
The Non-Life Insurance Act requires general insurers to maintain capital funds equivalent to 10% of earned premiums, but not less than 30 million baht.
According to Mr Sara, the OIC is also poised to intervene in the industry to shore up any firms whose capital falls below 2% as required.
”Life insurers’ investments are relatively conservative, as most of the investments are derived from long-term savings of the policyholders. Life insurers are all believed to take a special caution in their investments,” said Mr Sara.
”Together with the stringent regulations … and established financial status of the life insurers and continuous growth of the business over the past several years, it represents how strong the Thai life insurers are. We would like to call on all policyholders to stay calm and confident in the industry.”
