Bangkok--15 Dec--Fitch Ratings
Fitch Ratings says in a new report that the outlook on the Thai life insurance industry is stable based on strong growth prospects as well as solid solvency and profitability. Despite rising global capital market volatility, any adverse impact on performance is likely to be absorbed by Thai life insurers without affecting their ratings.
Fitch expects strong premium growth in 2012, supported by product innovation, tax incentives and expected post-flood economic rebound. Bancassurance, which has continued to expand, contributing to 35% of total net premium for the industry, is expected also to fuel premium growth.
"Rising global economic risks and capital market volatility are potential downside risks as the external environment remains fragile," says Narumol Charnchanavivat, Director in Fitch's Insurance team. "This could affect Thai life insurers' financial performance and solvency position although the impact should be manageable given their moderate equity holdings."
Life insurance premium growth in 2011 is likely to have slowed due to Thailand' severe and prolonged flooding in Q411 to about 10%, based on industry estimates, from 15% in 2010. Reported life insurance claims from the floods have been limited due to low penetration of life insurance in Thailand, but higher claims could come from personal accident and health contracts after the flood.
Thai life insurance companies have implemented the risk-based capital (RBC) standard in September 2011 with results of test runs for RBC indicating a robust capital position; average capital adequacy ratio stood above 300%. The industry's 9M11 net profits also saw strong 55% yoy growth due to revenue growth and stable costs. The balance sheet of Thai life insurers remains strong with solid capitalisation and no leverage.
Key risks on the outlook over the next 12-24 months include material slowdown in Thai life insurers' business growth, profitability and solvency position, due to a sharply weaker global economy, and/or a major shift in investment strategy towards higher-risk assets.
The full special report, entitled "2012 Outlook: Thai Life Insurance" is available at www.fitchratings.com or by clicking on the link above.