Non-life 'set for shake-up'
The non-life insurance industry is on the verge of a shake-up, with weakly capitalised players falling prey to consolidation, Standard & Poor's said yesterday.
However, the ratings agency gauged the industry's outlook as stable based on the country's low penetration rates, calculated as the ratio of premiums to gross domestic product. Figures for 2005 show that the penetration rate for life insurance here is only 2 per cent, compared to 8.6 per cent in Hong Kong, 6 per cent in Singapore and 2.5 per cent in India. The non-life penetration rate is 1.6 per cent, against 2.9 per cent in Taiwan. Life insurance is recognised as having strong growth potential and is on an upwards trend after dropping 4 per cent last year. The industry risk has improved to moderate from moderately high, due to an increase in the degree of expertise and sophistication, helped by better disclosure requirements, implementation of corporate-governance guidelines and a high degree of foreign participation through joint ventures. The return on assets for life insurers is over 2 per cent, which is quite stable, compared to 1-2 per cent in Hong Kong, Malaysia and Singapore. The concern is more for non-life insurance, which has stable underwriting performance, although the risks stemming from medium-term challenges are moderately high. "Much depends on how far the regulator is committed to liberalising the market and enhancing insurers' financial strengths over the longer term," credit analyst Paul Clarkson said. Small insurers can survive if they have their own niche, otherwise the regulatory minimum capital requirement will force mergers and acquisitions. Piyarat Setthasiriphaiboon
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