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The life-insurance business in Thailand is becoming more attractive to foreign investors because the industry has shown secure performance with its total assets, investment assets, capital fund and insurance reserve being well beyond the government's requirement.

Thai life-insurance companies have also been protected from any adverse effects of the financial meltdown in the United States thanks to stringent investment and management restrictions by the Office of the Insurance Commission (OIC) whereby operators have to invest in risk-free sectors, and their products must focus on basic insurance rather than investment units.

Thai insurance companies have always guaranteed their policyholders both payment and compensation through their total assets, fixed income and capital funds. As a result, many foreign insurers are interested in forming alliances or acquiring stakes in Thai companies.

According to reports, total assets in the Thai life-insurance industry grew by 16.15 per cent to Bt817.29 billion, investment assets rose 15.61 per cent to Bt646.32 billion and capital funds were Bt114.04 billion last year. Of total investment assets, investment in fixed income (government and state-enterprise bonds) accounted for 78.25 per cent, followed by private debentures at 10.73 per cent, bank deposits and bills of exchange at 9.97 per cent and loans at 8.71 per cent.

What makes local insurance coverage different from that in the West is that Thai consumers prefer basic coverage, which includes old age, retirement and endowment products. In the American and European cultures, life-insurance products involve investment services such as unit link, which may account for 60 to 70 per cent of the premium. However, policyholders decide what financial instrument their money is used in.

"Thai people need life insurance as a safety net, but people in the West need high yields," said Sara Lamsam, president of the Thai Life Assurance Association.

He pointed out that extensive investment in financial instruments had forced both insurers and policyholders to undertake high risks.

However, despite the financial meltdown in the United States, 23 Thai insurance companies (with the exception of Thai Re-Insurance) have smoothly continued operating with conservative investments, focusing mainly on government securities including government and state-enterprise bonds and bank deposits.

Sara suggested that consumers and policyholders consider insurance companies' reserves and capital funds before they decided to purchase a policy, as these factors should show the level of risk.

"The government has designed stringent investment regulations to protect consumers, under which insurers have to report their financial status to the OIC every quarter, every month from next year. Consumers are very, very safe thanks to the law," he said.

OIC is gradually deregulating some restrictions in a bid to cope with trade liberalisation not only under the Asean Community plan for 2015 but also in view of the World Trade Organisation's scheduled opening of the service sector, including the insurance business, marked for 2020.

However, despite the relaxed measures, insurers who breach regulations will still be subject to intense penalties.