Thailand’s Office of Insurance Commission have been discussing ways that the Asean (southeast Asian) region could increase the amount of catastrophe reinsurance cover they acquire and lower their costs. The OIC, who have recently launched their own catastrophe insurance pool, are actively promoting an idea to have an Asean natural catastrophe fund to help the nations of southeast Asia pool their buying power to get better rates with foreign reinsurers.
Pravej Ongartsittigul, a secretary-general of the OIC, said that the World Bank and IMF have both agreed that the region needs a catastrophe insurance fund. He’s quoted in this Bangkok Post article as saying, “They see us as one of the world’s most rapidly expanding regions, and strong funding will support infrastructure to be built in line with growth.”
It’s said that the Financial Service Commission of Korea has agreed that a regional catastrophe fund is required and would support it.
Thailand themselves established a nation catastrophe insurance pool as a response to the devastating floods the country suffered last year. It’s said to be having an impact already by helping to keep insurance rate rises lower than they would otherwise have been. The Thai catastrophe pool are themselves said to be actively looking to buy around $632m of reinsurance cover from international carriers, according to an article in Insurance Day. It’s possible that the experience they have had in this effort has led them to discuss pooling the regions risks.
The OIC plan to raise the issue at the Asean Insurance Regulators meeting later this year. If the idea is well received we could see efforts underway to establish a regional catastrophe fund underway soon after. Establishing the fund won’t be straightforward though given the differing profiles and penetration rates of insurance cover in countries around the region. The main goal of lowering reinsurance costs should be possible if the regions catastrophe coverage can be pooled and it will also make instruments such as catastrophe bonds more cost-effective for nations in the southeast Asian region.