S&P says quake losses in Thailand capped by reinsurers

Thai insurers have strengthened their reinsurance coverage over the years.

Losses from the 7.7-magnitude earthquake that struck Myanmar in March and caused damage in Bangkok will mostly be absorbed by global and regional reinsurers, according to a report by S&P Global Ratings.

The report estimates insurance losses for Thai property and casualty insurers at between $600m and $900m. 

These figures are significantly lower than past events, such as the $4.5b in claims from COVID-related insurance payouts in 2022 and the $15b in losses from the 2011 floods.

S&P noted that Thai insurers have strengthened their reinsurance coverage over the years in response to previous natural disasters. 

This has helped limit their financial exposure to the recent earthquake.

"Over the years, many Thai insurers have increased their reinsurance coverage to safeguard against natural catastrophe losses following a major flood in Thailand in 2011," said S&P Global Ratings credit analyst Billy Teh. 

"We believe these efforts will help cap their final losses from a recent earthquake in neighbouring Myanmar that also caused damage in and around Bangkok,” Teh added.

Despite manageable claims for local insurers, S&P expects reinsurance costs in Thailand to rise.

The increase in premiums may reduce profit margins for insurers over the next two years unless they offset the impact through growth in business volume and improved risk selection.

The report also pointed out that many property and casualty policies in Thailand have limited earthquake coverage, which reduces overall insured losses. 

However, insurers are expected to broaden coverage and work with catastrophe modellers to enhance risk assessment models. These improvements may include factoring in seismic wave patterns, soil conditions, and building heights to improve disaster resilience.