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Published on July 20, 2007

"A new shareholder will inject Bt500 million to lift our reserve requirement to meet the level identified according to the insurance law," president Montri Sang-Uraiporn said.

While the insurer has had trouble meeting the Insurance Depart-ment's requirements on its own, its cash flow is in a good shape, said Montri.

Finansa directly controls 10 per cent of Finansa Life and 80 per cent through wholly owned holding firms. The remainder belongs to Viriyah Insurance. The new shareholder was revealed by the Insurance Department recently as US investment bank Lehman Brothers.

However, Montri said details on the proposed shareholder structure and the arrival of the new owner were not forthcoming.

The insurance industry has grabbed headlines lately. Thanasin Insurance was ordered to halt writing new policies in March and this week Sampanh Insurance became the second to be ordered to suspend issuing policies.

Finansa is among insurers that have been warned and fined by the Insurance Department for deficits in their mandatory reserves.

Finansa Life needs to raise its registered capital from Bt2.1 billion to Bt2.6 billion by the end of the month, the deadline imposed by the Insurance Department.

It generated Bt307 million in first-year premiums in the first half of the year and Bt714 million in renewal premiums. The firm targets Bt2.2 billion in total premiums this year. It had Bt1.91 billion last year. It has about 140,000 individual customers with 150,000 personal-accident policies and 5,200 sales agents.

The Insurance Department also confirmed that Finansa has found a new partner that will allow it to chart a new business direction by firming up its financial status. Director-general Chantra Purnariksha said policyholders no longer needed to worry about coverage purchased from the firm.

Her department also plans to issue new insurance regulations on September 1, she said. They are designed to protect consumers by forcing insurers to stop writing policies if they fail to maintain their insurance fund as required by law and settle claims or pay garages that have repaired damaged vehicles.

Sara Lamsam, president of the Thai Life Insurance Association, said the 25-basis-point cut in interest rates would not cause problems, life insurance being a long-term means of savings.

Piyarat Setthasiriphaiboon

The Nation