THAI NON-LIFE SECTOR FACES NERVOUS FUTURE

THAI NON-LIFE SECTOR FACES NERVOUS FUTURE

Thailand's non-life insurance sector is bracing for an uncertain outlook after the official closure of Rattanakosin Insurance Ltd. last week because of liquidity shortages.

The nervous future prompted the Commerce Ministry to announce the formation of a special committee to oversee the companies faced with funding problems.The closure left the ministry scrambling for members within the General Insurance Association to assist with 11 non-life insurance companies volunteering to take over the 240,000 valid Rattanakosin policies. Almost two-thirds of the policies are in the area of compulsory car insurance, the balance are voluntary car insurance policies.

The shutdown, said to be a first within the Thai insurance industry, followed the company's failure to satisfy authorities over a rescue plan after a temporary suspension on April 9.

Rattanakosin Insurance had reported total debts as of April 16 at 850 million baht (US$21.25 million), while assets were reported as 1.55 billion baht. But the Insurance Department's Bungorn Meecharoen said the asset total may be less once a final official assessment is complete.

The General Insurance Association's motor insurance subcommittee said 11 non-life companies had offered to participate in a policy transfer program.

But industry executives warned of further closures, especially those companies with a large exposure to the vehicle insurance sector.

Nick Helms, general manager of GA Accident Insurance (Thailand) Co., says the companies most under threat are likely to be those in the motor insurance sector.

''The loss ratio across the market is getting worse and worse,'' Mr Helms said. The ratio in 1997, based on official figures, reached 72.9 percent, up from 70.5 percent the previous year - further evidence of a narrowing of margins. ''So there's trouble,'' he said.

But Commerce Ministry and insurance industry associations are aiming to prevent a meltdown similar to the finance sector, which led to 56 finance companies being closed last December.

Outside the area of motor vehicle insurance, ''the loss ratio on non-life products is very good. Non-motor insurance is doing quite well,'' Mr Helms said.

Industry sources say those companies with a heavy weighting of non-life motor insurance policies on their books are ''heading for trouble,'' and that it is a ''matter of time'' before the Commerce Ministry is forced to move.

But the ministry is fearful any opening of the sector will result in lead to a push by foreign companies taking a larger share, while encouraging moderate reform.

The non-life insurance companies face a double jeopardy with many holding investments in the finance companies closed last year and now unable to gain access to the funds.

Peter Fancke, Ayudhya CMG Life Assurance PLC president, says differing regulatory environment aids the life insurance over the non-life sector.

''Obviously the Rattanakosin situation has left people confused, which can have a negative impact on the whole industry,'' Mr Fancke said.

But the industry across Asia is looking to be hit by the recession over the next two years. ''Obviously, the whole region will face a bad time for the next two years,'' he said. ''Short-term profits will be hit. But the fundamentals for development remain good.''