Natural disaster insurance premiums are expected to reach appropriate levels three years after the 50-billion-baht National Catastrophe Insurance Fund was incorporated, Office of the Insurance Commission secretary-general Pravej Ong-artsithikul said.
Confidence in the government's flood prevention system will indicate what will be appropriate premiums, he said.
Premiums in neighbouring countries that also had severe floods have been set at 1% of the insured sum.
The World Bank estimated that it would take three years following the setting up of the catastrophe fund in March 2012 to fully restore confidence, said Mr Pravej.
In the wake of Thailand's worst floods in seven decades in late 2011, reinsurance premiums for disaster insurance policies surged to 12-15% of the insured sum as insurers lost confidence in Thailand's flood prevention system.
However, premiums have fallen to 1% for low-risk areas, 2-3% for flooded areas and higher than 3% for five provinces _ Ayutthaya, Nonthaburi, Pathum Thani, Nakhon Pathom and Bangkok _ that were severely hit by floods.
Before the floods, insurance companies charged disaster premiums at a mere 0.01% of the insured amount.
Current premiums are still far above the benchmark premiums set by the catastrophe fund at 0.5% for households, 1% for small and medium-sized enterprises and 1.25% for large companies.
The policy offers protection in the case of natural disasters such as floods, storms and earthquakes.
The 2011 floods swamped 150 million rai of land and affected more than 12 million people. The World Bank estimated damage of 1.44 trillion baht, the world's fourth-worst loss from a natural disaster.
Reinsurance companies received claims totalling 400 billion baht and it has been estimated they will take a century to recover the claims.
Mr Pravej said that unlike Japan, where natural disaster insurance is run by the private sector and covers only households, Thailand's insurance policies cover all segments and the government runs the system.
In Japan, insurance companies take full responsibility for paying for damage to housing not exceeding 104 billion yen (30.5 billion baht).
The government and insurance companies will jointly pay at a ratio of 50:50 for damage above 104 billion yen but less than 691 billion, while the government will pay 98.4% and insurance companies make up for the rest for damage of 691 billion to 6.2 trillion yen.
Payungsak Chartsuthipol chairman of the National Catastrophe Insurance Fund Committee and president of the Federation of Thai Industries, said insurance companies' confidence in Thailand has been restored, as witnessed by several companies directly buying natural disaster policies from insurers.
Chukiat Suphaisal, an expert in water management, said the 350-billion-baht water management projects would be completed in 3-5 years at the earliest.
The longer the projects take, the lower confidence in Thailand's flood prevention system will be, he said.
The cabinet in February approved the qualifications of six investment groups to bid for water management and flood prevention projects.
They are K-Water from South Korea, the Italian-Thai Development-Powerchina joint venture, Summit SUT joint venture, Team Thailand joint venture, Thai-Japanese joint venture and Loxley Consortium.
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Article source: http://www.thethailandlinks.com/2013/04/15/disaster-fees-normalise/
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