Cabinet to consider names of insurance fund managers next week

Finance Minister Kittiratt Na-Ranong is expected to submit to the Cabinet next week names of those who will manage a planned insurance fund after Parliament voted on the emergency decrees to address the flood disaster.

The two executive decrees for a Bt300-billion soft-loan package and a Bt50-billion insurance fund to provide natural-disaster protection were yesterday approved by the House of Representatives.

Finance Ministry permanent secretary Areepong Bhoocha-oom said Kittiratt was expected next week to submit the managers' names. Currently the ministry and insurance commissions are working out the details of the scheme. He gave his assurance that the Bt50-billion fund would be able to provide disaster protection to households and small and medium-sized enterprises.

The government insurance fund will act as reinsurer for 60 local insurance firms, Areepong said.

"We believe private insurance firms will join the scheme, as they can benefit from it because of the lower premiums collected by the government," he said.

The fund will be established soon after the Cabinet approves the management team for the fund, he said.

The government decided to create the fund after local and foreign insurers demanded very high premiums for natural-disaster coverage or refused to sell it at all after the severe floods last year.

Areepong said that before the floods, natural-disaster-insurance premiums totalled about Bt16 billion. That was not much compared with a combined Bt800 billion for both life and non-life insurance premiums, he said.

"Of course, some firms may demand five times the premium from insured customers after the flooding, but we don't think the overall cost will be much when the government steps in," he said.

As the government insurance fund will receive premiums paid by local insurance firms, the fund - equipped with Bt50 billion - would be able to handle future claims, he said.

He revealed that Japanese insurers had met with him over the past few days and were interested in joining the scheme.

Kittiratt offered reassurance that the government has adequate funds to provide disaster-protection coverage. The government also will invest in flood prevention, and damage in the future will not be high, he said.

Kittiratt said the government would soon reveal details of investment projects after the emergency decree to borrow Bt350 billion sailed through the Constitution Court and Parliament.

The opposition Democrat Party had petitioned the court to rule on whether the decrees were constitutional. They argued that there was no reason for the government to issue an emergency decree to borrow large amounts and the decree process lacked transparency. It is not necessary to order the central bank to pay off public debt of Bt1.14 trillion, the Democrats said.

Kittiratt argued that the government needed the credit line facilitated by the emergency decree as proposing such spending through the normal channel of the annual budget would be time-consuming.

He said experts had urged the government to invest as much as Bt800 billion to build an effective flood-prevention system. "We think it needs a lot of money, so we decided to invest only Bt350 billion," said Kittiratt, who is also a deputy prime minister.