NU Online News Service, Feb. 14, 10:52 a.m.EST
|The government in Thailand is looking to establish what would bethe largest excess-of-loss property catastrophe treaty in theworld—a catastrophe fund equipped to cover losses of up to $16.2billion.
|A briefing from insurance rating agency A.M. Best Co. says thecountry's government is attempting to keep flood insuranceavailable and affordable in the wake of four months of flooding in2011 that “delivered a shocking and unexpected blow to the globalinsurance industry in the form of an un-modeled event.”
|The catastrophe fund is “expected to be criticized because ofThailand's small reinsurance premium base, but it is a step in theright direction to restore confidence in the Thai market,” A.M.Best says.
|Details of the fund will take some time to negotiate, asreinsurers could be asked to cover it. That could be a lot to askfor, as industry-wide losses from the flooding are now estimated tobe $15 billion and it will be decades before reinsurers recoverlosses, according to A.M. Best. Many reinsurers are now skittish torenew flood policies in Thailand.
|“Reinsurers will no longer spare Thailand from consideration asa risk for natural catastrophes,” the briefing states.
|The market will undoubtedly change as a result of the disaster.The rating agency says. Flood coverage was included in manyall-risk policies and few policies required deductibles. In somecontracts, event limits aren't specified and policy languagepertaining to contingent business interruption claims will taketime to assess.
|As the industry continues to truly grasp the impact of thefloods, losses from the event could be seen throughout 2012,evidenced by insurers increasing fourth-quarter reserves for eventsearlier in 2011, A.M. Best predicts.
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