Thailand Insurance Report Q1 2008

This report differs from its predecessors in that it includes BMI's Insurance Business Environment Rating (IBER). The rating brings together a number of pieces of relevant quantitative data, together with BMI's Country Risk Rating (CRR). It is now much easier to consider the business environment for the insurance sector in any one country relative to the business environment for other industries in that country that are surveyed by BMI, and the business environment for the insurance sector in other countries.

Thailand's IBER is 57.4. While this is a moderately attractive insurance sector, particularly in the life segment, relative to the country's Asia Pacific regional peers, the rating is supported by a satisfactory regulatory environment but eroded by an increased country risk - most notably from the uncertain political situation - and a slow-growing, under-developed non-life sector. Economic growth faces problems and the population is growing slowly.

Over the forecast period, we anticipate that non-life premiums will grow by 11% annually in local currency terms and by 14% in US dollar terms, albeit from a low base. Life premiums are expected to increase by 8% annually in local currency terms and by 12% in US dollar terms. The key drivers of growth in the non-life segment in 2007-2012 are the anticipated rise in nominal GDP from around US$239bn to US$340bn and an expected increase in non-life penetration from 1.3% of GDP to 1.8%. The key driver of growth in the life segment is the envisaged rise in life density from a miniscule US$84 per capita in 2007 to US$140 per capita in 2012.

There a few barriers to entry to cross-border firms to the Thai insurance sector, although there are relatively few international players. The market is dominated by AIA, a division of the AIG group.

Elsewhere the competitive landscape, in both the non-life and the life segment, is fragmented, although there are signs that this is beginning to be addressed. The non-life segment is particularly underdeveloped; however, some sub-segments of this, such as motor insurance, have proven unattractive to foreign companies.

Thailand is a relatively developed and open economy with a satisfactory regulatory regime for the insurance sector. The growth in the middle class over recent years has led to strong growth in the life segment in particular. However, the country faces grave political uncertainty that December's general election is yet to resolve. This, combined with a growing nationalist message from some quarters, threatens economic growth and business sentiment. A significant disparity in wealth between the urban centres and rural areas remains both a weakness and, if there is political will to address the gap, an opportunity for development.